Lords Sitting of 10 May 2001

Preamble
The House met at eleven-thirty of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bradford.

Local Public Service Agreements
Lord Bowness Lord Bowness asked Her Majesty's Government:
What impact they expect local public service agreements to have on the best value regime for local authorities.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, the Government expect that local public service agreements will complement the best value framework in improving the quality and responsiveness of our public services. They will do so by testing the extent to which extra funding and regulatory freedoms can help stretch performance beyond the standards already achieved under best value and will inform best value policy development ill the future.
Lord Bowness: My Lords, I thank the Minister for that Answer. Perhaps the noble Lord recalls telling the House during Second Reading of the Local Government Bill that,
"Best value is about improving local services. It is about local government providing high quality services at reasonable cost that match local people's needs … No longer will they be able to provide minimal services at minimum cost … Best value rings a death knell for that approach".—[Official Report, 12/4/99; col. 572.]
Is the noble Lord saying that best value has not delivered those objectives and has been a failure? Can the Minister tell the House whether the inspection of the system is costing more than the £50 million that he estimated it would cost?
Lord Whitty: My Lords, I recall every moment of the passage of the Local Government Bill. Best value, which is a major feature of that Bill, is being adopted by all authorities across the whole range of service delivery and is achieving significant results. The cost of inspection is a relatively small figure compared with the benefit which we expect to achieve from the continuous improvement through best value. At that point in the Bill I was contrasting that output and performance-related approach with the heavy bureaucracy of the CCT regime which it replaced. As to additional funding and the relaxation of the regulation of local government, local PSAs will provide a further incentive to look at novel and better ways to deliver services.
Baroness Scott of Needham Market: My Lords, does the Minister really believe that the imposition by
1070
central government of hundreds of performance indicators and targets does anything to create local authorities which are accountable and responsive to local needs? Can the noble Lord tell the House what plans the Government have to monitor the burgeoning best value bureaucracy to see whether the process itself is delivering best value?
Lord Whitty: My Lords, the monitoring procedure to which we have already referred is intended to ensure that delivery meets expectations. Inevitably, within the system there is some resistance to the new process, and occasionally there are bureaucratic difficulties. But best value is related to output and performance. How output is achieved is up to the management of individual local authorities and their services. There is a great incentive for innovation and improvements in efficiency in local authorities, and that is what the whole best value regime is about. The regime is not an imposition but an opportunity for public services.
Lord Bruce of Donington: My Lords, can my noble friend tell the House whether what he has said is affected by the recent decision by the European Commission to outlaw gap funding which has brought considerable benefits to various local authorities within which approved schemes lie? Is he aware that report HC 714 of the House of Commons Select Committee on the Environment, Transport and the Regions shows in detail how perverse (to use its own word) and unwarranted is the Commission's decision to disallow this in future?
Lord Whitty: My Lords, at first sight the implications of that decision would appear to be as my noble friend indicates. However, we are in constructive discussion as to how best to meet the needs which that funding previously met to conform with the Commission's view of the European regulations in this matter. I do not believe that it will have the devastating effect that my noble friend suggests or the Select Committee indicates.
Baroness Gardner of Parkes: My Lords, is the Minister aware that it is rather euphemistic to say that this is being adopted by local authorities? As I understand the position as set out by the noble Baroness on the Liberal Democrat Benches, local authorities have no choice. Can the noble Lord clarify whether, although compulsory competitive tendering has gone, competitive tendering can still be part of the best value process, or has tendering gone altogether?
Lord Whitty: My Lords, the legislation may oblige local authorities to adopt best value, but the majority of local authorities do so enthusiastically. Therefore, I do not believe that it is a euphemism to say that local authorities are adopting it. As to competitive tendering, the previous very restrictive rules under CCT have been removed, but in order to deliver under the new system local authorities have the freedom to decide whether or not to go for competitive tendering. Many do so; others consider that either their existings

1071
contractors or in-house arrangements can deliver best value. It is that choice which is now available to local authorities.
Lord Bradshaw: My Lords, at the close of Parliament, does the Minister agree that today's suggestion put forward by the Conservative Party that local authorities would be required to undertake a local referendum if they wished to raise the precept by more than the rate of inflation will greatly further undermine the independence of local authorities and add a huge amount of additional bureaucracy to administration?
Lord Whitty: My Lords, yes, indeed. I am always amazed at the schizophrenia of the Conservative Party in this respect. They turn up in this House and in another place and complain about the imposition of centralisation by central government on local government. Sometimes I have some sympathy with them, as the noble Lord, Lord Dixon-Smith, knows. But then on the first day of a General Election campaign the party turns to local authorities and says, "You will have no choice. If you want a little bit of flexibility on your budget you have to go through this referendum process". If local authorities wish to go through that process, that is a matter for them, it is not a matter for imposition by central government.
Lord Taylor of Blackburn: My Lords, is my noble friend aware that Blackburn is one of the most outstanding progressive local authorities in this country? For some time it has adopted the principle of best value. May I invite my noble friend and any other noble Lords who want to see the benefits from best value to come to Blackburn and look at what we are doing there?
Lord Whitty: My Lords, my noble friend has made me well aware of the virtues of Blackburn in this and many other contexts. So far as concerns an invitation to Blackburn, clearly I and my colleagues would be only too delighted to visit Blackburn, both in order to observe the best value and, indeed, the football.
Lord Dixon-Smith: My Lords, does the noble Lord agree that his eulogy of the best value system in the past is hardly consistent with that of his right honourable friend the Economic Secretary to the Treasury. He describes it simply and merely as a "useful set of arrangements". However, is it not remarkable that after four years of government, the Treasury is instigating a leap in the dark in management services based on the document Choosing the Right Fabric: The framework for Performance Information? That publication includes such cliché gems as,
"to develop an education strategy, information will be needed on how well the current system is doing, and likely pressures in the future, such as increases in the number of school age children".
1072
Anyone working in an education authority 30 years ago was familiar with that opinion. It also states:
"The cost of producing performance information should be balanced against the use of the information and how it will improve performance".
Does the Minister really believe that we can develop a new and improved management system based on clichés that have been around for so long that most people in local government could teach the Government how to manage their affairs?
Lord Whitty: My Lords, sometimes in this House, and even in government publications, we have to point out the obvious. Best value is indeed a useful set of arrangements, but it is also, as I said, an amazing new opportunity for local government to deliver to the people.

Developing Countries: Corruption
11.46 a.m.
Baroness Whitaker Baroness Whitaker asked Her Majesty's Government:
What measures they are taking to combat corruption in developing countries.
Baroness Amos: My Lords, our bilateral programmes provide a wide range of assistance relevant to the needs of each country. They include support for national anti-corruption strategies; for example, the establishment of specific anti-corruption agencies; strengthening capacity for financial management; strengthening public oversight through parliaments; and supporting civil society to promote transparency and accountability.
The Department for International Development is also collaborating with other development agencies and contributing to multilateral efforts, through supporting the strengthening of financial intelligence units and regional anti-money laundering mechanisms.
Baroness Whitaker: My Lords, I thank my noble friend the Minister for that positive answer. I declare an interest as a member of the advisory council of Transparency International. But, bearing in mind the substantial criticism of the Government by the signatory states of the OECD anti-bribery convention and the fact that our law has not been updated since 1916, will the Government now leave the company of Turkey, Brazil, Argentina and Chile— the only remaining states not to implement the convention—and bring forward legislation to make it an offence for British citizens to bribe foreign public officials, as promised in the White Paper?
Baroness Amos: My Lords, the Home Office published proposals for reform in June 2000. I am sure that my noble friend Lady Whitaker is aware that we are committed to putting beyond doubt by legislation our compliance with the OECD convention. Exceptionally, that will extend jurisdiction to cover

1073
acts of corruption committed abroad by UK nationals, which takes the convention wider. One effect will be to clarify that there can be no tax deductibility for bribes.
Lord Redesdale: My Lords, following on from that answer, can the Minister say whether this is a matter of priority, because 38 of the 50 companies blacklisted by the World Bank for promoting corruption are actually domiciled in the UK?
Baroness Amos: My Lords, I can tell the noble Lord, Lord Redesdale, that it has come to our attention that those 38 companies are owned or operated by only two people.
Lord Alton of Liverpool: My Lords, will the Minister agree that in countries such as Benin—where the Government of President Kérékou have firmly spoken out against the practice of child slavery and the use of children as forced labour—nevertheless, the involvement of western companies, particularly in the manufacture of cocoa and subsequently in the chocolate industry, is frequently through collaboration with racketeering and profiteering in both countries? It is very difficult in a country such as Benin, which is strapped for resources, to have the necessary policing arrangements to prevent such corruption taking place. Is there anything further that Her Majesty's Government can do, not least in the light of the recent tragedy in Benin?
Baroness Amos: My Lords, we have a clear anti-corruption strategy which has four different elements to it. We are supporting developing countries that are themselves committed to effective anti-corruption policies. We want to drive out bribery from international trade and business, which was the nub of the noble Lord's question. We want to deter money laundering and protect development assistance. In addition, we work with organisations such as the ILO on issues of forced child labour to ensure that standards are in place in developing countries to protect children from forced labour.
Lord Howell of Guildford: My Lords, fighting corruption in developing countries is extremely important. The noble Baroness and her noble friend are absolutely correct about that. Is it not important to ensure that corrupt practices that are widespread around the world and are too often regarded as customs are not introduced or re-injected back into our own country? Is it not even more important to ensure that everyone in our own Government, from the Prime Minister downwards, has the greatest possible care and scruple in any connection or communication with people from developing countries who have been suspected or charged with practices of this kind?
Baroness Amos: My Lords, I am not surprised by the noble Lord's question, which is slightly wide of the Question on the Order Paper. I thought that noble
1074
Lords opposite could not resist this opportunity to make what I can only describe as a cheap electioneering point. I absolutely refuse to indulge in it because it is the present Government who have taken pains to ensure that corruption, both at home and abroad, does not feature in our politics.

Gas Supply
11.52 a.m.
Lord Ezra Lord Ezra asked Her Majesty's Government:
Whether there could be a shortage in the supply of gas at peak periods.
The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, there are provisions in the regulatory framework to ensure that shippers and suppliers take adequate steps to meet peak demand for gas. The independent regulator, Ofgem, has recently brought forward proposals to add to this framework. In addition, there are well tested procedures within the industry to manage any shortfalls in supply, such as drawing on gas from storage and invoking interruptible contracts. I can assure the noble Lord that Her Majesty's Government and the regulator are fully aware of the importance of all aspects of security of supply and that we continue to keep them under close review.
Lord Ezra: My Lords, I thank the noble Lord for that reassuring response. Is he aware of recent reports that in peak periods of a harsh winter the gas supply might be short? Is he further aware of the doubts expressed about the efficacy of the gas pipeline due to a shortage of maintenance engineers? In those circumstances, would it not be right to put even greater emphasis on diversity of supply, notably from renewables and from the development of clean coal technology?
Lord Sainsbury of Turville: My Lords, as far as I know, there has been only one instance of concern about the Interconnector and how it was operated in a situation where there were conflicting demands on it. That was the incident on 15th January 2001 when the flow of gas in the Interconnector was from a high price in the UK to a slightly lower one in Zeebrugge. That was a cause of concern and that is why we have asked the European Commission to look at the governance of the Interconnector. It was possible to deal with that situation in a reasonably favourable way. There are strong reasons for having diversity of energy supplies, including renewables, but that is a wider and more important issue than simply the failure of the Interconnector to achieve the right economic fundamental result on one occasion.
Lord Hardy of Wath: My Lords, although it is gratifying that the Government have thought seriously about the problem, is it not the case that the arrangements in place will be increasingly tested as we move further into a dependency on overseas gas

1075
supplies? In that connection, could not the points made by the noble Lord, Lord Ezra, be given further consideration?
Lord Sainsbury of Turville: My Lords, it is certainly true that as we go, as we almost certainly will, into a period when rather than exporting gas we import it—that is likely to take place in 2005—the Interconnector will become even more important to the interests of this country. It will be essential that the governance of the Interconnector should be of the highest standard in reflecting economic fundamentals rather than any other considerations. Over and above that, we want diversity of energy supplies because that is key to our security in a much wider sense.
Lord Trefgarne: My Lords, given the inevitability of a shortage of gas supplies sooner or later, can the noble Lord say whether the Government have investigated the possibility of generating gas from our large coal resources, which are now largely unexploited?
Lord Sainsbury of Turville: My Lords, I cannot give a precise answer to the noble Lord, but we will have to look increasingly at energy research to ensure that we have the best research on the most promising areas. That will ensure that we have the greatest diversity of energy sources as we go from being self-sufficient in energy to being reliant on other countries for our energy.
Lord Merlyn-Rees: My Lords, who is now responsible for the clean coal research that used to be carried out by the Gas Corporation?
Lord Sainsbury of Turville: My Lords, there is a large programme of research into clean coal. As far as I know, the Energy Group within the Department of Trade and Industry is responsible for research in that area, but I shall write to my noble friend and confirm that.
Lord Geddes: My Lords, the Minister has made only the most oblique of references to renewable energy, which was raised by the noble Lord, Lord Ezra, and by my noble friend Lord Trefgarne. Can the Minister expand a little on the ways in which the Government are encouraging the promotion and development of renewable energy?
Lord Sainsbury of Turville: My Lords, we have an enormous programme of research on renewable energy. The Department of Trade and Industry provides money for that. We now have the Carbon Trust programme of research and diffusion of that technology. Across government large amounts of money are being put into renewables. There may be room for debate on whether that research money is being allocated to the right areas—for example, whether enough is going on research for the hydrogen economy—but a good deal of money is certainly going into energy research.
Lord Tomlinson: My Lords, does the Minister agree that we should look not only at the supply of gas but also at demand? As noble Lords opposite have been trying to link all the Questions so far to the general election, does he not share in my surprise that they have not contemplated what would have happened to the demand for gas had the Government not had the foresight to remove VAT from it? Would there not have been a serious supply problem for many pensioners?
Lord Sainsbury of Turville: My Lords, I would not want in any way to make a political statement, but I think that my noble friend makes an excellent point.
Earl Attlee: My Lords, at some stage the issue of nuclear power will have to be considered. Can the Minister explain why it has taken more than two years for the Government to come up with their Green Paper on the disposal of nuclear waste? It is a key issue.
Lord Sainsbury of Turville: My Lords, our research into future energy supplies is extremely important. The area of nuclear waste is complicated and it is essential to get it right.

Tourism
11.59 a.m.
Viscount Falkland Viscount Falkland asked Her Majesty's Government:
What results they expect from £12 million they have committed to advertising British tourism abroad.
Lord McIntosh of Haringey: My Lords, the Government have made available an additional £14.2 million rather than £12 million to the British Tourist Authority in this financial year, bringing total funding to £49.7 million. The BTA anticipates that that will set it on course to generate around £1.1 billion in additional expenditure by overseas visitors to Britain. The Government expect that to help to minimise any adverse effects of the foot and mouth outbreak on Britain's receipts from inbound tourism in 2001. We expect that tourism to the UK will receive a further boost in 2002, the Golden Jubilee year, and that demand will be stimulated for future years.
Viscount Falkland: My Lords, the House will accept the figures given by the noble Lord and dissociate itself from his remarks as regards foot and mouth disease.
Is the Minister aware that when, on this coming Saturday, I lay out my Ray-Ban sunglasses and leather trousers in order to ride my motorcycle to the Cannes Film Festival—this is a serious business—I shall do so in the absolute certainty that on the way there I shall be travelling on good roads, eating good food, staying in a clean and cheap hotel and receiving excellent service? Will the Minister consider the remarks made by the influential Lonely Planet guide to Britain?

1077
Although complimentary about some of the attractions in this country, in its summary it offers the view that Britain is an expensive country with bad weather, undesirable food and questionable service.
Lord McIntosh of Haringey: My Lords, this is not the first occasion on which the noble Viscount, Lord Falkland, has sought to denigrate the attraction of Britain as a tourist destination in comparison with other countries. I do not say that his denigration is absolute, but certainly it is in contrast to what he says about other destinations. I have to say to the noble Viscount that the Government do not take that view. Income from inbound tourism has continued to increase over the years, so something must be going for this country, and the Government are not responsible for the weather.
Lord Crickhowell: My Lords, in view of the devastating damage still being caused to the tourism industry as a result of the foot and mouth outbreak, along with the fact that any upturn in inbound tourism is not likely to take place for some time to come, what steps will the Government take to help those parts of the tourist industry which will have the greatest difficulty surviving in any form until the upturn arrives?
Lord McIntosh of Haringey: My Lords, the first role of the Government must be in line with the Question and Answer which has already taken place; namely, to try to overcome the problems by encouraging inbound tourism. That is exactly what the Government have been doing. In addition to those efforts, the Government have offered significant extra support for domestic tourism. Only this week we announced funding of £24 million for the regional development agencies' Rural Business Development Fund to help tourism in the worst hit areas. Grant aid of up to £15,000 is available to help small businesses. Assistance is offered with promotion to help encourage visitors to return. Furthermore, there has been an acceleration in rural regeneration projects. All this must be seen as complementary to our efforts to bring visitors back.
Lord Harrison: My Lords, is it not the case that Labour governments have helped the British tourism industry, as exemplified by the Development of Tourism Act 1969, while Conservative governments have failed to help, as exemplified by the airport departing passenger duty, which represents a stealth poll tax on American, Japanese and Korean visitors coming to this country?
Lord McIntosh of Haringey: My Lords, my noble friend is absolutely right. When I answered the third Question of this Parliament by stating, "My noble friend is absolutely right", I had been waiting 14 years to use those words. Now that I am answering the last Question of this Parliament, I am glad to have the opportunity to repeat myself.
Baroness O'Cathain: My Lords, I recognise that an awful lot of electioneering is taking place today, but I
1078
think the Minister will agree that it is the case that most tourism in this country is home generated. The injection of £24 million is rather pathetic and represents only peanuts for the regional development agencies. Although that sum is at least something, is there any chance that, during the last two days of this Government, some effort could be made to increase it by a factor of at least 100 per cent?
Lord McIntosh of Haringey: My Lords, over the last two days of this Parliament, Ministers will continue to carry out their duties. However, the noble Baroness will be aware that from this stage onwards it is not considered proper for new government ventures to take place.
I do not think that the financial help I outlined in response to the noble Lord, Lord Crickhowell, is peanuts. The sum represents significant assistance. Furthermore, in addition to the help being offered to businesses themselves, we have made available additional funding of £3.8 million to the English Tourism Council. That money was not included in the figures cited in my original Answer. It has been made available on top of the very significant increases in real terms to funding over the current three-year period.
The Earl of Sandwich: My Lords, does the noble Lord agree that his original Answer to the Question put by the noble Viscount was rather short on results overseas? Can he offer any tangible evidence of such results? I speak as someone whose American cousins are unwilling to come over to stay with me in Dorset because of the alleged foot and mouth outbreak.
Lord McIntosh of Haringey: My Lords, I think that it is still early days to look for results in terms of bookings. Of course it is a fact that the BTA has recorded a significant decline in bookings, in particular from the United States and from some, but not all, European countries. However, the combination of direct marketing activity and the efforts being directed at encouraging travel agents and tour operators based in other countries to return to this country will, I am sure, achieve an effect over the coming months.
The Lord Bishop of Bradford: My Lords, perhaps I may press the Minister slightly further on this point. Will be accept that this question is not of a party political or electioneering nature? I, too, have American friends who have expressed the fear that, if they visit this country, they will then take hoof and mouth—as they call it—back to the United States. Can the British Government issue a categorical denial that that is not in any way a possibility? Such a denial would greatly assist farmers, not least in my diocese, who have suffered as the result of both farming problems and the loss of bed-and-breakfast custom.
Lord McIntosh of Haringey: My Lords, not only could we do that; we have been doing so. Ministers, staff representatives of the British Tourist Authority in other countries and our Diplomatic Service have been

1079
energetic in their promotion of the truth about foot and mouth disease. Unfortunately, many people think that it is the same thing as BSE.

Armed Forces Bill
12.7 p.m.
The Minister of State, Ministry of Defence (Baroness Symons of Vernham Dean): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Baroness Symons of Vernham Dean.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Lord Burnham Lord Burnham moved Amendment No. 1:
Before Clause 1. insert the following new clause—
"CONTINUANCE OF THE 1955 AND 1957 ACTS
The power otherwise conferred in this Part to continue the 1955 Acts and the 1957 Act in force by Order shall cease to have effect on 31st December 2004 unless there has been brought before each House of Parliament before that date a measure to bring the discipline of all the armed services together into a single statute."
The noble Lord said: This is the first time that I have addressed a Committee of your Lordships' House during the rush for the doors. I do not think it worth while to try to make any serious points while that is going on, except to say that,
"The tumult and the shouting dies—
The captains and the kings depart"—
to which I was slightly startled to find that Father Ronnie Knox added the lines,
"And we are left with large supplies
Of cold blancmange and rhubarb tart".
Amendment No. 1 raises a point about which we on these Benches have been making a fuss for some considerable time. To be quite fair, it has also caused concern on the now government side of the Chamber. On Second Reading my noble friend Lord Attlee and I stated in the strongest terms that it really is time that we had a unified discipline Bill for the three services.
In the debates on what is now the Armed Forces Discipline Act, my noble friends and I strongly made the point that we must have a single tri-service discipline Act. In 1966, in the debates on the Armed Forces Bill, the noble Lord, Lord Williams of Elvel, standing where I am now, raised the same point. He was supported by my noble and learned friend Lord Mayhew. In replying from the Dispatch Box, my noble friend Lord Howe said that a start had been made in 1991 after the introduction of the previous Armed Forces Act.
So attempts to introduce a single tri-service discipline Bill go back at least 10 years, and I suspect—I have not checked—as far as the original Acts in 1975 and 1977. That is too long. Not only this government
1080
but all governments are at fault for not kicking the legal people in the Ministry of Defence to get a move on.
Members of the Armed Forces spend so much time with one another—they work together and they play together—that we must have a unified discipline Act. It is with this in mind that I have tabled these two amendments. I hope that I will be able to persuade the Minister to give an assurance that we will get a move on and attempt to place such an Act on the statute book. I beg to move.
Lord Wallace of Saltaire: We strongly support the sentiments behind the amendment. We hope that the Government will give the strongest possible reassurance that it will not take another five years.
Lord Renton: We should bear in mind this further point. In my experience on active service during the Second World War, it was frequently the case that Army units, especially divisional and brigade headquarters, had attached to them officers of the RAF—perhaps only one officer—who might have a clerk attached with them. Then, as areas were occupied along the coast of Egypt and Libya, naval officers would come along from ships in the Mediterranean to co-operate with the Army. It is essential that we should bear in mind such occasions.
There has been an all-party tendency over the past 40 years to bring the Armed Forces closer together in their higher command in London. That they should have separate and different kinds of discipline, and different ways of enforcing it, really is quite absurd.
Baroness Symons of Vernham Dean: I am a little surprised by the wording of the amendments. Not only do the amendments seek to curtail the usual five years between Bills introduced to continue the service discipline Acts, they seek also to prevent those Acts being continued at all unless tri-service legislation has been introduced. I am sure that the noble Lord, Lord Burnham, has taken that point on board.
To include such a provision in the Bill would leave us with no leeway in the future; it would force us to bring forward new tri-service legislation regardless of its state of readiness and whether it was suitable to present to your Lordships and to another place. That would do a disservice to our Armed Forces. It would subordinate the overriding objective of preserving effective procedures for the maintenance of discipline to a completely arbitrary timetable.
When the noble Earl, Lord Howe, was addressing this issue, he was talking about consolidation of the three single service Acts, not about creating a unified Act, which is what we are talking about. Although I agree that consolidation would be a worthwhile goal in itself, it would not give us an opportunity to harmonise or in other ways change the body of service legislation, which is the kind of Bill that we wish to bring forward.
There is little difference between us on this issue; we all want to see tri-service legislation brought forward as soon as possible. The noble Lord, Lord Burnham,

1081
was frank enough to admit that previous Conservative governments had not taken this issue forward as quickly as they might have done. The Committee will recall that during the Second Reading debate I assured the House that we will examine the feasibility of introducing a. tri-service discipline Bill within the next three years. But, of course, I also pointed out that the key was to ensure that the legislation was appropriate for the services.
I ask the Committee to entrust to the Ministry of Defence—and, indeed, to the services themselves—the decision about when such fundamental legislation should be introduced. Given the assurance that I have noted very carefully the strength of the points made by the noble Lord, Lord Burnham, and the points made in support of the amendment by other Members of the Committee, I hope that the noble Lord will withdraw his amendment.
12.15 p.m.
Lord Burnham: I thank the Minister for those remarks. I freely admit that the amendment was tabled as a threat. Had we had more time to discuss the Bill—it has been very curtailed—we would have pursued this issue at length. I do not think it is good enough that it should be 10 years—with every prospect of another five years—before we get the legislation for which we are looking. It was a threat because the amendment was designed to introduce a specific date by which the Ministry of Defence would be compelled to come up with something.
I thank the noble Baroness for her concluding remarks. She made it quite clear that work will be done. The purpose of the amendment is that when the House comes, in 2006, to debate the Armed Forces Bill and finds that there is still no provision to introduce a consolidated or unified Bill, whoever is dealing with the matter, on both sides of the House, will be able to look hack and say that quite a fuss was made in 2001. We cannot make a longer fuss—we do not have the time—and therefore I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 [continuance of service Acts]:
[Amendment No. 2 not moved.]
Clause 1 agreed to.
Clause 2 [Powers to stop and search persons, vehicles etc]:
On Question, Whether Clause 2 shall stand part of the Bill.
Lord Craig of Radley: I oppose the Question. I do so to draw attention to a real concern that the responsibility, and above all the authority, of a commanding officer is being eroded. I do not think that there is any division or any split between the Government and those with a long interest and long experience in these matters, but the authority of the commanding officer is of key importance to operational effectiveness.
1082
Owing to the short notice that was given of this Committee stage and the tabling of amendments, I must explain that the thrust of the numerous proposals standing in my name and that of the noble and gallant Lord, Lord Inge, is to strike Part 2 from the Bill. I should also say that the noble and gallant Lords, Lord Inge and Lord Bramall are both with me in spirit but, regrettably, because notice of today's proceedings was so short they have been unable to alter other pressing commitments in order to attend. Indeed, I myself am forgoing a very enjoyable lunch at the Ritz today!
If the fistful of proposals in the name of the noble and gallant Lord, Lord Inge, and myself could have been tabled more elegantly, I hope that the Committee will forgive me. Shortage of time and our concern to give this topic a proper airing today in Committee are my excuse. So, with the leave of the Committee, I propose to speak to the generality of our opposition to Clauses 2 to 16 as a whole.
I greatly regret that a constitutional Bill such as this has become a victim of the procedures that apply at the end of a Parliament. The Bill must pass into law before the end of 2001. However, I consider it a great discourtesy to the Armed Forces, on whom we rely so heavily, that the significant changes to their disciplinary practices and procedures introduced in the Bill are being taken through virtually on the nod.
How do we explain such cavalier behaviour, when several months of parliamentary time will remain before the end of the new Session of Parliament after the election? The reasoning behind these amendments and those of other Members of the Committee are worthy of proper scrutiny. The views of Members in this place are being by-passed in an unconstitutional way.
However, that background alone is not enough to justify taking up the time of the Committee. There are key aspects of the content of Part 2 which concern me greatly. Because time is short, I shall confine myself to three issues. The first is the fundamental change that the authority of the commanding officer in matters of discipline should no longer rely on the inherent powers which for years, perhaps centuries, he or she has had. I suspect—but this is a matter more for lawyers than for me—that these inherent powers have been based on Crown prerogative. I believe, therefore, that the Bill, in raising concerns about long-standing reliance on the authority of the Crown prerogative in this area, may be laying open questions about prerogative authority in other areas of defence and national business.
I leave it to others far better qualified than Ito deal with the legal bones of this issue. My point is that the Government should be able to assure the Committee that they have given careful consideration to what might be called the law of unintended consequences. If there is a legal reason to doubt the authority of Crown prerogative in this area, have all other areas which may rely on it been considered? The danger of abandoning it in one key area but continuing to rely on it ill others seems a dangerous route to follow.

1083
So if, as I assume, the so-called inherent powers of the commanding officer have relied up to now on Crown prerogative, the Committee needs to be aware of that, and to take into consideration the other areas where reliance continues to be placed on Crown prerogative before abandoning it in relation to the inherent powers of the commanding officer. I look forward to hearing the Minister's comment on this point.
My second concern relates to the statement in the helpful Explanatory Notes which the MoD issued with the Bill. In paragraph 15 on page 5 we are told that,
"the scope of these [inherent] powers is unclear. It is desirable that they should be clarified and put on a statutory footing".
The notes state, in paragraph 17, that this would provide,
"that extra certainty and independent legal supervision of applications for permission to search, to avoid the risk of a successful challenge to searches being made under the European Convention on Human Rights".
That seemed clear, and I drew attention to it in my Second Reading speech. In a letter commenting on my remarks—and I thank her for taking the trouble to respond so fully—the Minister said that the changes being introduced in Part 2 were not driven by the European Convention on Human Rights. She went on to say that Part 2 responds to the long-standing wish of the services to have a clear structure and definition for their powers in these areas. Well, that was news to me; and while I would not wish to challenge the Minister's information, I feel that there is something unsatisfactory about the way in which Members of this place have been given a variety of rationales for Part 2.
In her letter to me, the Minister also quoted extracts from the evidence given by the Chief of the Defence Staff to the Select Committee on the Armed Forces Bill in another place. In those remarks the CDS indicates his view that there is nothing in the Bill which would make discipline more difficult to maintain, and that some of the powers which are being given to our service police in terms of search will also help to smooth the way in which discipline will be conducted. I know that the Chief of the Defence Staff has been trying to reach me by telephone over the past 24 hours. I regret that we have not been able to speak; either he has missed me, or when I tried his number it was always engaged. He is now in Italy.
On the narrow issue of the Bill's impact on the authority of the commanding officer, I have little difficulty in accepting what the CDS said in his carefully worded evidence. He certainly could not be expected to tell the committee that it was all rubbish. My point, and that of the other noble and gallant Lords, is that this change should be seen alongside the other series of changes which have had an impact on the authority of the commanding officer in recent years. Apart from the Human Rights Act, we have seen changes in the procedures for summary punishments and for courts martial, worries about the impact of the International Criminal Court legislation, and so on.
1084
It is the collective impact which concerns me; and it is only because I have been privileged to sit in this House for the past 10 years that I have been given a much broader canvas on which to judge these matters. Like the proverbial straws on the camel's back, little by little we are adding to the erosion of the inherent powers, and thus the perceived authority, of the commanding officer. Those Members of the Committee who were present for the Second Reading debate or who noted what the noble and gallant Lord, Lord Inge, and I said—he far more eloquently than I can aspire to—about the crucial importance of the commanding officer in all of the services' business, whether in terms of ethos, operations or leadership, as well as in matters of discipline, will appreciate the broad point.
The services rely greatly on self-discipline, and on the leadership and trust that is given by and to the commanding officer. The commanding officer has already proved himself as a potential commander and he has earned his place to take the overall charge that is placed upon him of his unit. COs have commented on the additional bureaucracy of the summary disciplinary arrangements. Part 2 of the Bill will add another large fistful of paperwork to ensure that its provisions are administered correctly. And so it goes on.
So the kernel of my concerns relates to the many specific reductions in the powers of the commanding officer in the disciplinary field, and to the fact that the authority of the CO must relate to his operational and other command responsibilities as well as to his responsibilities in the field of discipline.
Part 2 of the Bill erodes the commanding officer's authority. I shall not trouble Members of the Committee by drawing attention to the many words and phrases in Part 2 which spell that out. The clauses are all, by and large, of a restrictive nature. Given more time, I would accept that there may well be parts of the Police and Criminal Evidence Act 1984 that should be incorporated into service law. But one has to ask why it has taken over 15 years to get round to bringing such provisions forward. I surmise that it is because, at that time, it was argued successfully that Crown prerogative gave a proper defence in law and more was not needed.
My third and final point follows the discussions that we have had over the introduction of a combined Bill to cover the three services. It would seem sensible, if such a provision is to see the light of day, that the issues that are being raised in relation to Part 2 today should be held over and given the thorough consideration and debate that they so richly deserve. At the end of the day my concern—and it is a very real one—is that the erosion in disciplinary authority cannot but read across eventually to operational authority. We shall not have successful Armed Forces of the calibre that we now enjoy if we have eventually eroded the status and trust that have traditionally formed part and parcel of the role of command. I oppose the Question that Clause 2 shall stand part of the Bill.
12.30 p.m.
Lord Campbell of Croy: My Lords, I support the noble and gallant Lord, Lord Craig, in his remarks and what the noble and gallant Lord, Lord Inge, said at Second Reading on the position of commanding officers. They have pointed out that the authority and effectiveness of commanding officers could be undermined by Clauses 2 to 16.
I shall, of course, be brief in what I have to say. The considerable powers and discretion that have been granted to that level of rank—the rank, in the Army, being lieutenant-colonel commanding a battalion, or its equivalent—have been an important element in our armed services. I shall not repeat what they have said, but I should like to add the following element. The position of the commanding officer in the British Army counted for a great deal on active service and on operations in the Second World War, in which I served as a regular officer throughout; that is, from 1939 to 1945.
I could not remain in the Army because I was severely wounded and partially disabled at the end of the war. However, before then, I commanded a field battery in a Scottish infantry division for three years. I was not the commanding officer—he was the lieutenant-colonel commanding the field regiment—but I was very close to him during those three years and to the commanding officers of the infantry battalions with whom we were operating in our division. Of course, I am now out of date on military matters, having had to leave the Army in 1946 following my discharge from hospital. However, my remarks today are intended to reinforce the concern that has been expressed by very eminent former senior officers from their experience. I should like to add to that from my limited war experience during the whole of Second World War.
Lord Chalfont: My Lords, perhaps I may offer a few brief remarks in support of the noble and gallant Lord's opposition to the Question that Clause 2 stand part of the Bill. When one considers the comments that I have made in recent days in this House, it may seem strange that I should be supporting him on an issue of the sanctity of the chain of command. However, I can assure noble Lords that there is no inconsistency here. To some extent, my worry is the same as that of the noble and gallant Lord; namely, that this is a constitutional matter.
I am not speaking of constitutional law, or even of military law; I am speaking of the constitution in the sense of the broad scheme of things under which a constitutional democracy is run and governed. It seems to me that the effect of this Bill might be to bring about—in however small a way—a further erosion of what we understand as the constitution in this country. I point no finger at any government when I say this, but it appears that respect and support for the constitution in that broader sense have been, and are being, eroded very considerably. As I say, that is no fault of any specific government because it has been happening over a long period of time. However, I believe that we ought perhaps to do something to halt
1086
that erosion. As the noble and gallant Lord said, that might at some time be the straw that actually breaks the camel's back.
Therefore, my first point is that this is a matter of constitutional importance, not just of importance to the Armed Forces. However, there is also the point about the position of the Armed Forces within the over-arching constitution and the civil law. As I have said in another context in this House, military law must always be subordinate—and this is generally accepted in this country—to civil law. However, within that broad framework, we are also in danger of forgetting something else; namely, that the Armed Forces, consisting of the Army, the Navy and the Air Force, have a very special role to play. Again, I believe that we are tending to forget that and allowing the special nature of the Armed Forces, and respect for them, to be eroded.
That is especially true of the role of the commanding officer. It does not matter whether he is a CO in the Army, the Navy or the Air Force—or, indeed, whether he is commanding a battalion, a squadron of aircraft, a frigate, or whether he is the lieutenant-colonel, as the noble Lord, Lord Campbell, mentioned. The commanding officer is probably the most important person involved. Whichever service he is in, the CO is the most significant link in a very important chain of command. Therefore, anything that tends to diminish or erode the commanding officer's power and responsibility, and the respect in which he is held, is undesirable and should be resisted.
However, my real reason for contributing to this brief debate this morning is to stress something that I believe has already been said by the noble and gallant Lord. It is a great shame that a Bill of such importance should be taken during the last two days before the dissolution of Parliament. The Bill has enormous implications, not only as regards the commanding officer and his role but also as regards the whole role of the Armed Forces. Moreover, as the noble Lord, Lord Burnham, said, there is the possibility that sooner or later we might—at last—have a tri-service discipline Act. I believe that we should be discussing a Bill of this importance in that context.
I must, therefore, support the noble and gallant Lord in this respect. It seems very sad to me that we are deciding this morning within just a few minutes, in a thin House, matters that will affect not only the role of the Armed Forces and that of the commanding officer but also, possibly, the constitution of this country.
Lord Wallace of Saltaire: My Lords, the noble Lord, Lord Chalfont, raised some broad issues. I have to say from these Benches that we are in favour of reform of the constitution. As I have been occasionally involved, I note that we are spending a considerable amount of time with our NATO allies, hoping to reorganise the armed forces of the former Warsaw Pact and to insist that armed forces recognise that, in a democracy, they should as far as possible stem from civil society and be subject to some of the disciplines of civil society. That also seems to be entirely appropriate in this country.

1087
We are advised that serving officers in the Armed Forces are not, at present, unduly concerned about these clauses but that they assume that the essential principles of the Armed Forces disciplinary procedures are not fundamentally affected. Of course, there will have to be some differences in military discipline from civilian life. However, the burden of proof is on those who would argue that the differences should continue for their own sake. We do not believe that the authority of the commanding officer is being eroded by these necessary modernisations. They are partly designed to bring such procedures into line with the terms of the Police and Criminal Evidence Act 1984 and partly relate to the European Convention on Human Rights, which we on these Benches do not see as a fundamental threat to the British constitution. We shall, therefore, oppose the various proposals for these clauses to be removed, and support their retention in the Bill.
Lord Burnham: My Lords, the erosion of power of the commanding officer is extremely worrying. I do not believe that it is right that it should be contained in a Bill of this nature, at this time. It is not right that we should be unable to discuss it in full. The noble and gallant Lord has not tabled any amendments: he has gone for the blanket policy of moving that this clause should not stand part of the Bill. He has given a perfectly good reason for doing so; indeed, it is a good method by which to discuss the problem.
Before the commencement of the debate this morning, I joined the noble Lord, Lord Wallace, in taking a cup of coffee. He asked me about the time when I was in the Army. I had to confess to him that it was 50 years ago. However, the principles of discipline have not changed in that time. I do not believe that the powers or the constitutional position of a commanding officer should be changed in the way envisaged in Part 2 of the Bill. To that extent I have immense sympathy with, and agree with, what has been said by those two great experts, the noble and gallant Lord and the noble Lord, Lord Chalfont.
However, we have had discussions with the Government through the usual channels and, with exceptions which we shall come to, we have given an undertaking that we shall support the Government in getting the Bill through at this time even though its provisions are not needed until the end of December.
I say to the noble and gallant Lord that I have total sympathy with, and totally agree with, all that he said. However, if he divides the Committee on this matter I regret that I shall be unable to recommend to my noble friends that they should support him.
12.45 p.m.
Baroness Symons of Vernham Dean: Like the noble and gallant Lord, Lord Craig of Radley, I shall address all the clauses that he opposes—Clauses 2 to 16 inclusive—as I believe that he has made generic points which apply equally to all those clauses.
It is important to explain to the Committee that Part 2 has a very clear purpose. It is to strengthen and clarify the powers of the services in relation to aspects
1088
of the investigation of offences under the service discipline Acts. The intention behind the changes is to set out those powers in detail to avoid the doubt that currently prevails. I say to the noble and gallant Lord that the Explanatory Notes do not state that the clauses are driven by the ECHR. They make clear that the change is wanted and would result in a reduction in the risk of successful challenge under the ECHR.
As regards the point that the noble and gallant Lord made on the prerogative issue, we do not consider that the changes raise wider issues about the prerogative generally. They are focused on a narrow area; that is, the powers of search of persons and personal accommodation in investigating offences. Commanding officers need greater clarity as regards where they stand. It is undeniable that for some time there has been concern among the services that the powers of search of commanding officers and of service police are not clear enough. The wish for clearer powers predates concerns about compatibility with the European Convention on Human Rights. However, in setting out the powers in legislation it makes sense to take account of the powers of the ECHR, to make them clear and to enable us to have a measure which is sufficiently robust to withstand legal challenge.
Therefore, concerns about the convention are not the reason for, or the trigger behind, Part 2 as the service police have wanted clear powers of search for some time. Indeed, the Police and Criminal Evidence Act 1984 already contains powers for most of its provisions on powers of search to be applied to the service police.
However, to have used the powers of the 1984 Act to apply these provisions by secondary legislation would not have protected the position of the Armed Forces and the position of the commanding officer in the way that we considered necessary. A key element of Part 2 is that it reserves certain powers for use by the commanding officer in, for example, enabling him or her to authorise searches of accommodation without a warrant. It would not have been possible to achieve this essential safeguard using the powers in the Police and Criminal Evidence Act as they are simply not wide enough. The Committee must consider that it would be unfortunate if we had no alternative other than invoking the powers of the 1984 Act. I am afraid that the effect of that would be the exact opposite of what is sought by the noble and gallant Lord in that commanding officers would have no reserve powers in these matters. That is not what the noble and gallant Lord would wish to see.
One of the main concerns of the services, in particular the service police, in seeking the introduction of provisions such as these is that the current absence of clear powers and procedures increases the risk of successful challenge against the admissibility in a subsequent trial of evidence seized. Evidence may be excluded from a court martial at the discretion of a judge advocate if he or she believes that it is in the interests of fairness. That power does not derive from the European Convention on Human Rights. It has always existed under the common law and under the service discipline Acts. The introduction

1089
in Part 2 of search warrants, for example, will leave evidence obtained as a result of searches less vulnerable to successful legal challenge.
I know that the noble and gallant Lord, Lord Craig of Radley, is concerned in particular about Clause 8, which provides for a judicial officer to review any evidence obtained during a search conducted without a warrant but on the authorisation of a commanding officer. The reason for that is to ensure that such evidence should be less vulnerable to a successful challenge at a subsequent court martial because it has already been examined by a judicial officer.
It is worth emphasising that the provisions in Part 2 have nothing to do with any searches other than ones carried out as part of the investigation of an offence. They do not, therefore, apply to searches and inspections undertaken as part of normal barracks discipline or for health and safety reasons. Moreover, the restrictions in Part 2 on searching premises apply only to the personal accommodation of persons subject to service law. Any searches of other parts of service property remain entirely a matter for the commanding officer. It is important to understand that the scope of Part 2 is limited in that respect.
I should also restate the Government's position in relation to the applicability of the European Convention on Human Rights to the Armed Forces, as this is clearly an issue which troubles the noble and gallant Lord and some of his noble and gallant colleagues. The remarks made by my noble and learned friend the Lord Chancellor during the passage of the Human Rights Act that,
"the Convention poses no threat to the effectiveness of the armed forces"
were mentioned at Second Reading by the noble and gallant Lord, Lord Craig of Radley. The noble and gallant Lord went on to assert that this Bill, in its present form,
"makes a travesty of that assurance".
I have to say that I disagree fundamentally with that remark of the noble and gallant Lord. Even if these changes were being made primarily because of the European Convention on Human Rights or the Human Rights Act, it would be quite wrong to suggest that they threaten the effectiveness of the Armed Forces, any more than the Armed Forces Discipline Act has done.
The Chief of the Defence Staff, Admiral Sir Michael Boyce, spoke about this issue to the Select Committee examining the Bill in another place. Of the changes in the Armed Forces Discipline Act, he said that,
"there is nothing to indicate that they are affecting operational effectiveness".
As an aside I was interested to read the comments of Mr Robert Key—I am sure that the noble Lord, Lord Burnham, will be interested in the comments of the honourable Member for Salisbury in another place—on his visit to the Military Corrective Training Centre at Colchester as a member of the Select Committee on the present Bill. I am sure that we all remember that Mr Key was a formidable opponent of the Armed
1090
Forces Discipline Act when it was going through Parliament last year. But he found, according to his article in Defence Review, that,
"the curtailment of summary discipline and the introduction of a right of appeal in last year's Armed Forces Discipline Act has led to a fall in the number of inmates consumed with poisonous simmering resentment following pedantic, harsh or unreasonable summary sentences".
Those comments are worth noting given the vociferousness of the honourable member on that point. The comments offer an interesting insight. A corollary of fairer procedures is not necessarily a weakening of the system of discipline. Fairer procedures strengthen the system by increasing respect for it.
However, I must return to Sir Michael Royce's evidence to the Select Committee on the Bill. Asked about the changes proposed in Part 2, he commented,
"some of the powers which are being given to our Service police in terms of search will also be helpful to smooth the way in which discipline is conducted. On the whole, I think if it will have any impact at all, it should be a beneficial impact".
So it was not just that he was denying that there was anything negative: he was saying that there may indeed be something positive.
I find it difficult to reconcile these informed observations with concerns that Part 2 of the Bill represents a threat to operational effectiveness. The Government's commitment to the maintenance of operational effectiveness is an unqualified commitment. I gave that commitment at Second Reading and I have done so on a number of occasions from this Dispatch Box. We do not merely pay lip service to the importance of the special circumstances of service life—those special circumstances that noble Lords who have served in the service often draw rightly to our attention. In developing our proposals for legislation, we are guided by those who have current hands-on experience of those circumstances. This is reflected in Part 2 of the Bill. It provides a clear structure for powers of search, as the services wish. At the same time, it fully recognises the realities of service life by. reserving very important powers to the commanding officer.
Perhaps I may refer again to Sir Michael Boyce's evidence to the Select Committee. He said:
"As I have said in other committees and in other places as well, operational effectiveness is my benchmark and my line in the sand, and I can assure you that if operational effectiveness were being affected by anything, I would make that perfectly clear".
That is an unequivocal statement on which I am sure all your Lordships would place considerable emphasis.
Part 2 of the Bill is of considerable importance to the services in contributing to the establishment of a proper regime for the investigation of offences. It represents a balanced and responsible approach to the issue. On the other hand, the removal of Part 2 would just leave the services in an arguably worse position than they are in today. By means of the Bill, we shall have highlighted the deficiencies and uncertainties of the present procedures but the loss of Clauses 2 to 16 would remove the remedy that we propose. I do not consider that that is a responsible line of action, least

1091
of all if it were to be on the basis of some misconceptions which I am afraid have been advanced against Part 2 standing part of the Bill.
Lord Craig of Radley: First, I thank all noble Lords who have spoken in this short debate. The Minister has advanced a number of cogent points. If one had more time one would like to consider them; but one cannot do that.
I was happy with much of what the noble Baroness said. However, I was unhappy about the Royal prerogative issue. I think that your Lordships may want to return to that discussion at another time and in another place. I do not oppose that Clause 2 stand part.
Clause 2 agreed to.
Clauses 3 to 16 agreed to.
Clause 17 agreed to.
Schedule 1 agreed to.
Clauses 18 and 19 agreed to.
Schedule 2 agreed to.
Clauses 20 to 22 agreed to.
Schedule 3 agreed to.
Clauses 23 to 29 agreed to.
Schedule 4 agreed to.
Clause 30 agreed to.
Clause 31 [Extension of jurisdiction]:
Lord Burnham Lord Burnham moved Amendment No. 3:
Page 29, line 30, leave out "is amended" and insert "may be amended by Order in Council approved by both Houses of Parliament to confer extended jurisdiction as an emergency measure for limited jurisdiction"
The noble Lord said: When times were different—that is to say, before Wandsworth—we tabled a raft of amendments on Part 4 of the Bill. It has some good things in it but we were generally unhappy. However, I understand that the Government will agree to withdraw Part 4 of the Bill—Clauses 31 and 32 and Schedule 5—and will not press that they stand part of the Bill. If the Minister can give me that assurance, I shall be happy to withdraw the amendment and all the other amendments which relate to Part 4. I am sure that she will give that assurance—but if not, après nous le déluge.
Baroness Symons of Vernham Dean: It may be for the convenience of the Committee to know that the Government will not seek to insist on the retention of Clauses 31 and 32, and Schedule 5. We remain of the view that this is a lost opportunity to make a number of beneficial changes concerning the Ministry of Defence Police. I understand that some members of the Conservative Party in another place took a similar view. However, now is neither the time nor the place to detain the Committee on detailed arguments on this.
1092
As the noble Lord indicated, I have given my agreement to the wish that he expressed: that Clauses 31 and 32 and Schedule 5 do not stand part of the Bill.
Lord Wallace of Saltaire: In those circumstances, I shall not move the amendments standing in my name on Part 4 and Schedule 5.
Lord Burnham: I thank the Minister for those remarks. I agree with the noble Baroness that this is neither the time nor the place to discuss the merits or demerits of Part 4. As she is a marvel, I simply say:
"Had we but world enough, and time,
This coyness, lady, were no crime".
I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 4 to 11 not moved.]
Clause 31 negatived.
Clause 32 negatived.
[Amendments Nos. 12 and 13 not moved.]
Schedule 5 [Amendments relating to Ministry of Defence Police]:
[Amendments Nos. 14 to 22 not moved.]
Schedule 5 negatived.
Clauses 33 and 34 agreed to.
Schedule 6 agreed to.
Clauses 35 and 36 agreed to.
Schedule 7 agreed to.
Clause 37 [Orders and regulations]:
Baroness Symons of Vernham Dean Baroness Symons of Vernham Dean moved Amendment No. 23:
Page 36, line 31, leave out from "Act" to "exercisable" in line 32 and insert "is"
The noble Baroness said: In moving the amendment, I speak also to Amendments Nos. 27 and 29 to 33. As a result of Part 4 not standing part of the Bill, all provisions in other clauses and schedules consequential on Part 4 need to be removed. These are straightforward amendments designed to achieve just that. I beg to move.
On Question, amendment agreed to.
[Amendment No. 24 not moved.]
Baroness Symons of Vernham Dean Baroness Symons of Vernham Dean moved Amendment No. 25:
Page 36, line 33, at end insert—
"() an order under section 8(2),".
On Question, amendment agreed to.
[Amendment No. 26 not moved.]
Clause 37, as amended, agreed to.
Clauses 38 to 40 agreed to.
Clause 41 [Short title and commencement]:
Baroness Symons of Vernham Dean Baroness Symons of Vernham Dean moved Amendment No. 27:
Page 37, line 41, leave out "to (s)" and insert "and (4)".
On Question, amendment agreed to.
[Amendment No. 28 not moved.]
Baroness Symons of Vernham Dean Baroness Symons of Vernham Dean moved Amendments Nos. 29 to 32:
Page 38, line 13, leave out subsection (5).
Page 38, line 25, leave out "or (5)".
Page 38. line 27, leave out "or (5)".
Page 38, line 28, leave out from "State" to "to" in line 29.
On Question, amendments agreed to.
Clause 41, as amended, agreed to.
Schedule 8 [Repeals]:
Baroness Symons of Vernham Dean Baroness Symons of Vernham Dean moved Amendment No. 33:
Page 92. lease out lines 24 and 25.
On Question, amendment agreed to.
Schedule 8, as amended, agreed to.
House resumed: Bill reported with amendments; Report received.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), Bill read a third time, and passed, and returned to the Commons with amendments.

Social Security Contributions (Share Options) Bill
1.4 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Brougham and Vaux) in the Chair.]
Clauses 1 and 2 agreed to.
Clause 3 [Special provision for roll-overs]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 1:
Page 5, line 5, leave out "(assuming it to be exercisable at that time)"
The noble Lord said: In rising to move Amendment No. 1, I shall speak also to Amendment No. 3. Comments received from practitioners experienced in employee share arrangements have led us to propose an amendment to guard against a mischievous interpretation.
At issue is whether an option is to be taken as being exercisable on the key date of 7th November 2000. The situation could arise, for example, whereby an option had not yet vested on that date. It could be argued that, because the option was not capable of exercise on 7th November 2000, a nil charge should arise under Clause 2. However. that is clearly not the intention of the legislation. We are providing a way for companies to settle their secondary national insurance contribution liabilities on all options granted between the dates set out in Clause 1.
The simplest way in which to amend the legislation is to omit the specific reference at Clause 3(4)(b)(ii), which is the intention behind Amendment No. 1, and to add an overall provision in the interpretation clause (Clause 5), as sought in Amendment No. 3, to apply to the Bill as a whole. I beg to move.
Lord Higgins: As always, I am lost in admiration for the versatility of the noble Lord. Only a moment or two ago he was dealing with problems of tourism (I only regret his failure to refer to my former constituency of Worthing in that context); now he is dealing with the highly complex matter of social security and share options. As I understood him to say, the purpose of the amendment is to prevent mischievous interpretation—no doubt a term of art in your Lordships' House, although I must confess that I have not come across it previously in my earlier experience.
This is the third attempt to get this legislation right. I recounted at Second Reading the history of the way in which it had been dealt with both in the child support, pensions and social security debates and in the Finance Act 2000 debates. I am sure that it is important to get these provisions right. We are seeking to get the technical aspects of the Bill in order; that we are in favour of doing so was apparent earlier.
To put the matter into context, overall it arises from the imposition of yet another stealth tax. In the mail this morning I received a rather interesting analysis based purely on the Government's Red Books, and so on, which showed that there had been some 45 stealth taxes and that, over the life of the Parliament, in the region of £360 billion has been collected in such taxes. However, we certainly welcome this provision because it is designed to ameliorate the effect of the fundamental approach so far as concerns national insurance contributions and share options.
We still have doubts about the legislation because we believe that it penalises employers who wish to use share options as incentives. In addition, we believe that on the part of those involved there is still an element of gambling as to whether they should accept the Government's option of taking a tax hit straight away or whether they should wait to see what happens to their share prices.
None the less, our overall attitude towards the Bill is favourable. Subject to what we may say in a little while with regard to other amendments, I believe that it is right that we accept this amendment. Given the unbelievable complexity of the measure, it is important that we have no doubts as to how something may be interpreted by the Government on the one hand and by taxpayers on the other. Therefore, we are certainly very happy to accept the amendment.
Lord Goodhart: I also support the amendment. This is an extraordinarily complex Bill that takes up eight full pages and deals with a point where the concept is quite simple. I agree entirely that a problem was created by the rapid rise of the dot.com shares and their subsequent, more or less equally rapid, fall. That problem is dealt with appropriately by this Bill.

1095
I am not sure whether to describe the Bill as a masterpiece of parliamentary drafting or as a tribute to the ability of the legal profession to make matters so confusing that an extremely lengthy Bill is needed in order to deal with all the possible arguments that may be raised by learned counsel. However, it seems to be right. On Second Reading I raised certain questions about the timing at which companies had to elect, but I did not think it fit in the circumstances 'to press the matter further by tabling an amendment.
Lord McIntosh of Haringey: I am grateful for even the modified rapture of the noble Lord, Lord Higgins. The answer to the noble Lord, Lord Goodhart, is, yes to both of his questions—the provision is both a masterpiece of drafting and a tribute to the cunning and complexity of the minds of the legal profession.
On Question, amendment agreed to.
Lord Higgins Lord Higgins moved Amendment No. 2:
Leave out Clause 3, and insert the following new clause—
"SPECIAL PROVISIONS FOR ROLL-OVERS
(1) In this section—

(a) an "original right" is a right to acquire shares in a body corporate granted after 5th April 1999 and before 20th May 2000;

(b) a "replacement right" is a right to acquire shares in that or any other body corporate granted or acquired in consideration of the assignment or release of an original right (whether comprising all or part of the consideration for that assignment or release);

(c) a "parity exchange" occurs on the grant or acquisition of a replacement right where the gain which could reasonably be expected to be made on the exercise of that right immediately after the grant or acquisition of that right (on the assumption, if necessary, that that right was capable of being exercised at that time), together with the value of any other consideration given for the assignment or release of the original right, is not manifestly greater than the gain which could reasonably be expected to have been made on the exercise of the original right immediately prior to the assignment or release of that right (on the assumption, if necessary, that the original right had been capable of being exercised at that time);

(d) an "enhanced exchange" occurs on the grant or acquisition of a replacement right where a parity exchange does not occur; and

(e) the gain which might be reasonably expected to be made on the exercise of a right to acquire shares shall be determined in accordance with section 135(3)(a) of the Income and Corporation Taxes Act 1988 (c. 1).

(2) On a parity exchange—

(a) any notices made, or deemed to have been made, under this Act in respect of the original right shall be deemed to have been made in respect of, and shall have the same effect in relation to, the replacement right and any other consideration given for the assignment or release of the original right; and

(b) any special contribution paid, or deemed to have been paid, under this Act in respect of the original right shall be deemed to have been paid in respect of, and shall have the same effect in relation to, the replacement right and any other consideration given for the assignment or release of the original right.

1096

(3) On an enhanced exchange the consideration given for the assignment or release of the original right shall be apportioned on a just and equitable basis into two parts, the first of which representing all of those terms of the replacement right and of the other consideration. if any, given for the assignment or release of the original right which could have been granted, required or given so as to give rise to a parity exchange (to which part subsection (2) above shall apply) and the second of which representing the remaining terms of the replacement right, and of the other consideration, if any, given for the assignment or release of the original right (to which part the provisions of this Act shall not apply).

(4) For the purposes of subsection (3) above, on any partial exercise, assignment or release of the replacement right any gain arising shall be treated as comprised in the second part in priority to the first part.

(5) Where a replacement right to which the foregoing provisions of this section apply is assigned or released for a consideration which comprises or includes a subsequent replacement right, the first mentioned replacement right shall he treated as if it were an original right, and the subsequent replacement right shall be treated if it were a replacement right within the meaning of subsection (1)(b) above, and subsections (2) and (3) above shall apply accordingly on the assignment or release in question.

(6) In subsection (4) above, references to a subsequent replacement right are references to any right to acquire shares in a body corporate which are or have been obtained by any person as, or as part of, the consideration for the assignment or release by him of a replacement right or of a subsequent replacement right.

(7) Where prior to the coming into force of this Act payments have been made in respect of Class 1 contributions due on the exercise of any replacement right, then on a claim being made by the person who paid them all such repayments of those contributions shall be made, less any amount representing the special contributions which would be due under section 2 above."

The noble Lord said: This amendment is also a masterpiece of drafting, for which I can take very little credit. It contains special provisions for roll-overs of share options. As I pointed out on Second Reading, the debates in another place were very heavily programmed and the discussion on this issue was rather limited.
There is a particular disadvantage in this context, in view of the extent to which the courts can, as a result of Pepper v Hart, take into account the travaux préparatoires of any Bill. I doubt whether there is any case in which it would have been more helpful to have had an extended view of the Government's approach than in relation to this Bill.
The Bill completed its Report stage and Third Reading in another place on 8th February. My honourable friend Mr Howard Flight rightly raised this issue and was doubtful about whether the clause's drafting was as simple or clear as it might be. In reply, the Minister assured him that that was so.
Following that exchange, further correspondence has ensued between the Government and the Chartered Institute of Taxation, which was kind enough to send me a copy of the correspondence. It expressed severe doubts about the Bill's current provisions, which are helpfully described in the Explanatory Notes, which were updated between the Bill's consideration in another place and its arrival in this House. The institute said that it was very doubtful about whether people generally would be able to apply the provisions—they will have to rely to a large extent

1097
on the interpretation by the Revenue of the way in which the Bill will be applied. It felt that the drafting was so complicated that even professional tax operators would have difficulty understanding the Bill's provisions. It suggested—I hope that the Minister will respond to this point—that while it was not in favour of legislation by tax bulletin, it is important for the Government to set out clearly and with examples how they believe the provisions and the Bill in general will operate.
Considerable concerns remain in this context. Amendment No. 2 was an attempt, with outside bodies, to try to produce provisions that might be a little simpler than the current drafting of Clause 3. I sincerely thank the Minister for arranging for me to have a meeting with him and his officials, who were extremely helpful in explaining the various points at issue.
One might regard the amendment as a probing amendment—if so, it probably holds the world record for being the most complicated probing amendment ever thought up! I know that the Minister has some doubts about it but I hope that he will view it in the context of the Bill. He might also give us some idea of how many people he thinks may need to know what the legislation means and how it should operate. In some respects there do not appear to be many problems with options that are rolled over at parity, although the Bill's wording is still pretty complicated. However, there are additional problems and even greater complexities when the options that are rolled over are not at parity. I tabled the amendment in the spirit of hoping to improve the Bill, which, despite the overall context, we certainly welcome. I look forward to the Minister's response. I beg to move.
Lord McIntosh of Haringey: Let me be the first to acknowledge that Clause 3 is extremely complex and that the noble Lord's proposed replacement is somewhat simpler. However, I am afraid there is no way round the Bill's complexity because it has to cover a wide range of situations in which one option is replaced by another, or "rolled over", as the jargon has it.
I am grateful to the noble Lord for his reference to the meeting that we had last week—it was a helpful meeting at which we discussed his concerns about the clause. I explained to him that the Government are anxious to see whether anything could be done to simplify the provisions while retaining the policy aims of having consistency and fairness in the national insurance charge. Before and after that meeting, the Inland Revenue looked very carefully at the effects of the amendment and tested it against a variety of scenarios. The results are set out in a table in the letter that was sent to the noble Lord and to Mr Benson, who was acting on this occasion on behalf of the Chartered Institute of Taxation. That analysis showed that although the amendment is worthy in its aim of seeking to simplify the clause, it unfortunately fails to achieve the desired result. It would also allow fewer options to be settled than the Bill's current drafting.
1098
Let me give an example to show why the amendment would not work. Clause 3 will ensure that a national insurance charge will not arise provided that the option is rolled over at parity—that is, the consideration given for the option at each roll-over is not greater than the inherent gain in the old option at the time of the roll-over. Any excess over parity should be subject to Class 1 national insurance contributions. That parity rule must apply at the stage of each roll-over. The Inland Revenue found that the amendment fails effectively to achieve that in multiple roll-over situations. The result would be that the amount of national insurance contributions paid in multiple roll-over cases would be higher than was intended when the share price was falling and higher when it was rising. Rather than relieving all of the circumstances in which the clause is intended to apply, it would result in an unfair approximation for the purposes of the Bill.
The clause as it stands achieves its aim and we cannot guarantee that re-working the amendment—we also considered that as an alternative—would give us anything less complex in the end.
I was asked whether we would set out guidance to help those who would be affected by this part of the Bill. We shall make available detailed guidance on the provisions for the few companies that will require it. I shall come to the number in a minute. We are grateful to the Chartered Institute of Taxation for its offer of assistance in drawing up the guidance. We shall take advantage of that offer.
The noble Lord, Lord Higgins, also asked how many people might be affected by Clause 3. The number is very small. The total number of options that come under the ambit of the Bill is not more than 2,000, affecting perhaps 50,000 people. We estimate that the number of options on which the provisions of the Bill might be taken up will be no more than 1.300, affecting 30,000 people. A much smaller proportion of those will be rolled over—I should be astonished if it were more than 10 per cent. The proportion affected by multiple roll-over will be even smaller. The number of people who will take advantage of the roll-over provisions in Clause 3 will probably be smaller still. We are talking about tens, or, at the most, hundreds of schemes affecting hundreds, or, at the most, single-figure thousands of people.
We have gone to great lengths to ensure that the provisions in the Bill are fair. I am sorry that the gallant attempt of the noble Lord, Lord Higgins, to make them simple as well is not acceptable.
Lord Higgins: I am sure that the Committee is grateful to the noble Lord for that explanation. It is depressing for practitioners in the field that they will have a smaller market than one might have supposed. I am grateful to Minister for his suggestion that there will be adequate briefing for those who are affected by the measure.
The Minister's most convincing line of argument was, if I understood him correctly, that my amendment would involve more tax being raised from

1099
those involved. It may have occurred to some people recently that the Conservatives are not in favour of increasing taxation.
Lord McIntosh of Haringey: I should be the last person to accuse the noble Lord of trying to introduce a stealth tax. It is not a phrase that I care for.
Lord Higgins: I shall leave that on one side. It would be inappropriate for me to press an amendment that would increase taxation and it would make me rather unpopular in my party. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3, as amended, agreed to.
Clause 4 agreed to.
Clause 5 [Interpretation]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 3:
Page 8, line 23, at end insert—
"() Where any assumption that a right has been exercised at any time is made for the purposes of any provision of this Act, that assumption shall be taken to include the assumption that that right was capable of being exercised at that time."
On Question, amendment agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 4:
Page 8, line 34, leave out "this section" and insert "the provisions of this Act"
The noble Lord said: I am afraid that I must burden the Committee with a minor amendment that relates to the way in which the legislation will operate.
When we were looking at the regulations that will be needed to bring the notification procedures into force, we noticed that, as presently drafted, only Clause 5 would be treated as if it were contained within Part I of the Social Security Contributions and Benefits Act 1992. That was an oversight. We need a change of words so that the whole Bill can be brought within the ambit of Part I of that Act. Without the amendment, we could not use the existing administrative procedures contained in that Act to introduce the regulations to be made under the Bill. The amendment will correct that. I beg to move.
Lord Higgins: As Parliament has been struggling since May 1999 to get the legislation right, we must hope that this final amendment succeeds in that objective. We shall not oppose it.
On Question, amendment agreed to.
Clause 5, as amended, agreed to.
Clause 6 agreed to.
Title agreed to.
House resumed: Bill reported with amendments; Report received.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), Bill read a third time, and passed, and returned to the Commons with amendments.

Finance Bill
1.27 p.m.
Brought from the Commons endorsed with the certificate of the Speaker that the Bill is a Money Bill, and read a first time.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May):
Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time.
It is good to be able to speak to this Bill at a time when the fundamentals of our economy are stronger than they have been for a generation. As a result of our reformed monetary framework, tough fiscal rules and prudent choices, we now have inflation at its lowest for 30 years and the lowest in the European Union; long-term interest rates at their lowest level for 35 years; the highest business investment for 40 years, at more than 14 per cent of GDP; and the lowest unemployment since 1975, with more people in work than ever before—over 1.1 million more than in 1997.
We have sound public finances, having cut free of the millstone of debt run up by the Conservatives. Where this Government inherited a £28 billion deficit and debt at an unsustainable 44 per cent of national income, we have made the biggest ever net cash debt repayment in one year by a British Government, at £34 billion, and we have reduced the net debt to below 32 per cent of national income.
As we have cut debt, cut unemployment and achieved higher growth and earnings, we are freeing up resources for priority areas in a sustainable way. The fall in debt charges alone has freed up £7 billion for next year compared with four years ago. The fall in spending on unemployment benefit has freed up another £4 billion. We can plan ahead, investing for the long term in the nation's priorities—education, health, fighting crime and investing in transport and science. Those are priorities on which our future prosperity depends.
The Bill builds on that strength and continues to deliver on our promises. The Chancellor's Budget makes a clear choice about Britain's future. It sets out a platform on which to build opportunity and prosperity for all. Like the Budget, the Bill takes a balanced approach, with stability as its foundation.
Our hard-won economic stability enables us to start to deal with decades of under-investment in public services, skills and infrastructure. That stability is the basis for the success of Britain's businesses and a better deal for pensioners, children and families. Maintaining and locking in that stability for the long term is at the heart of the Bill. This is a Bill for families, a Bill for children and a Bill to tackle poverty.

1101
We have made a clear choice to take account of the costs of children through the tax and benefits system, to help every child make the best start in life. It is a matter of choice that we have increased child benefit to £15.50—a rise in real terms of 26 per cent.
Clause 52 introduces the children's tax credit of up to £l0 a week, equivalent to a cut of 2.5p in income tax for those families. From next year, in the year of a child's birth, families will receive £20 a week. Families which received just £11.05 a week under the last government will receive £25.50 per week. We are increasing maternity pay to £100 by 2003 and will increase the payment period from 18 to 26 weeks, as well as introducing two weeks' paternity leave for new fathers.
The Bill also takes further steps to make work pay for all. Twenty-five million taxpayers will gain from the widening of the lower 10p tax rate in Clause 51, at a cost of £1 billion. Now, more of their income will be taxed at that lower rate rather than at 22p.
We have put up the working families tax credit by £5 and announced an increase in the minimum wage. The two together mean that the guaranteed minimum income for families with children and someone in full-time work will rise to £225 per week. That will make a real difference to families on modest incomes.
To make sure pensioners share in the rising prosperity of the nation, we are increasing pensions above inflation and above earnings by £5 per week to £72.50 for single pensioners and £8 per week to £115.90 for couples, with a further rise of £3 and £4.80 next year.
As a result of the measures that we are introducing this year alone, households will, on average, be £240 a year better off. Families with children will, on average, be £420 a year better off and 2 million of the poorest pensioners at least £800 a year better off. Living standards for a typical family have risen 10 per cent since the general election, with particular help to the poorest and those who need it most. That is the measure of our commitment to building not only a strong economy, but a fair society—one that is making every one better off.
To create long-term rising prosperity in Britain we must build the best possible environment for business to flourish and productivity to rise. Our ambition is to achieve a faster rise in productivity than our main competitors over the next decade. We want successful companies in all sectors to invest and expand. We have already created a more favourable company tax environment with the lowest corporation tax rate ever in Britain and overall the lowest rate of any major industrialised country. We have reduced the long-term capital gains tax rate on business assets to 10 per cent.
Recent evidence has been encouraging. In the past year the economy has grown at 3 per cent and manufacturing productivity by 5.6 per cent. Business investment grew by 2.4 per cent last year and we are now investing at over 14 per cent of GDP, the highest level in 40 years. But we still have some way to go. So we have proposed further reforms to promote competition, investment, innovation and entrepreneurship.
1102
We will promote long-term investment and protect investors by taking forward Paul Myners' recommendations in his Review of Institutional Investment, including abolishing the minimum funding requirement, and we will make it easier for institutions to invest in venture capital through tax and regulatory reform. We are building a competitive and modern tax system for large firms, with changes to double taxation relief in Clause 79, and the abolition of tax on most payments between companies within the UK in Clauses 83 to 85.
We are consulting in detail on relieving tax when companies sell substantial shareholdings. Since 1997 enhanced capital allowances and new tax credits to encourage research and innovation have already saved business over £1 billion. Increasing research and development by large companies can have a big impact on the UK's long-term productivity, so we are consulting on how best to extend the R&D tax credit to larger firms.
This Bill will also improve the environment for small and medium sized enterprises. Clause 62 doubles the value of share options which can benefit from tax relief through enterprise management incentives to £3 million. Clause 61 extends the right to benefit from this relief to all employees.
Alongside the measures introduced in this Bill, we are reducing the burden of tax and regulation on small firms, with a package of measures to cut the VAT administration burden—of which I have often spoken to your Lordships from bitter experience. We are simplifying small business corporation tax by making companies' annual accounts the basis for calculating tax, cutting at a stroke the need for a whole parallel paper-chase.
This Bill will make the tax system more responsive to specific needs to benefit businesses, communities, and people throughout Britain. In particular it will help to ensure that those areas of Britain which have been left behind by rising prosperity are able to catch up, with a package of six tax cuts totalling £ l over five years, targeted on enterprise in our poorest areas.
We are giving a boost to the British film industry by extending tax relief for British films for a further three years in Clause 72.
We are reforming betting duty.
In recognition of the importance of our national heritage, we are bringing in a scheme to help with the cost of repairs to listed churches and places of worship and making available refunds to national museums and galleries which allow the public free admission. We are initiating consultation on tax relief for community sports clubs.
On skills, we recognise that today's economy demands more workers with higher skills and qualifications to fit new jobs. But up to 30 per cent of all employees do not have basic level 2 qualifications. So as well as the extensions of New Deal and the provision of the training people on benefits need to move into work, we want to encourage companies and employees to upgrade their skills. So to back up the tax

1103
relief we already offer to employee training, we will consider a new tax credit to support training. And we are launching an independent study to enhance the supply of highly-skilled scientists and engineers.
Britain is already one of the best business environments in the world. The reforms we are making in this Bill will make the environment for all businesses better still, and we will continue to look at new ways to help Britain's companies raise their productivity.
Following on previous Budgets and the steps we have taken to tackle climate change, improve air quality, promote lower emission fuels and renewable energy and to regenerate run-down areas, this Finance Bill carries forward the Government's commitment to a sustainable environment.
Clauses 1 to 3 give effect to our cuts in fuel duties for ultra-low sulphur petrol and ultra-low sulphur diesel, and enable the Government to provide reliefs for pilot projects developing more environmentally friendly fuels.
Clauses 8 to 14 increase to 1549cc the engine size below which the lower rate of car vehicle excise duty is paid, reforms VED for goods vehicles and implements the new exemption for tractors and agricultural machinery. Altogether, those are worth £1.6 billion a year to motorists—equivalent to a 4p per litre cut in fuel duty for motorists—and £660 million a year to the haulage industry—equivalent to a 7p per litre cut in fuel duty for hauliers, as well as promoting less environmentally damaging fuels and vehicles.
The introduction of the aggregates levy in Clauses 16 to 49 seeks to promote the use of recycled aggregates and other alternatives to primary aggregates, in a revenue neutral way, in order to reduce the adverse environmental impacts of quarrying such as damage to biodiversity, visual intrusion and nuisance to nearby communities. The money the levy raises will be returned to business and to local communities through a 0.1 percentage point cut in employers' national insurance and through the new Sustainability Fund, which will come into operation in April next year. As announced in the pre-Budget report, £35 million a year will be allocated to the fund and we shall consult further on the details of its operation.
The climate change levy and the landfill tax dealt with in Clauses 104 and 105 demonstrate our readiness to incentivise environmentally sustainable use of scarce resources. By bringing actual market costs more in line with real economic costs, economic instruments allow those involved in environmentally damaging activities to respond according to their own circumstances. Attaching a price to environmental detriment creates a permanent incentive for innovation and investment in less polluting methods of production, and encourages the consumption of "cleaner" products. And revenues from new environmental taxes are being used to cut the rate of national insurance, rather than to boost the income of the Exchequer. That is not only economically rational, but it is also environmentally responsible.
1104
The Bill sets out a clear choice for Britain's future. The platform of economic stability that this Government have built is the foundation for Britain's future prosperity. We have chosen to build on that stability. We have chosen more investment in our public services, not less, with schools and hospitals coming first, and we have chosen sensible tax cuts for hardworking families, and not a return to boom and bust.
As I said, this is a Finance Bill for families and children and one that tackles poverty and unemployment in our poorest communities. It is a Bill to help Britain's businesses grow; a Bill to carry forward stability as the basis for a strong economy and a strong society; and a way to deliver opportunity and prosperity for all. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord McIntosh of Haringey.)
Lord Goodhart: My Lords, in the absence of my noble friend Lord Newby, perhaps I may be allowed to take his place. I intend to speak briefly. The main problem demonstrated by this Budget is a refusal to face the fact that the tax changes introduced by the Government over their term of office have, to a large extent, been regressive rather than progressive. That has been due largely to the Government's refusal to recognise that income tax could and should be used effectively when taxes are needed. Undoubtedly income tax is the fairest of taxes. It is a simple tax, and it is understood by all. But the Government have stuck to their promises not to raise taxes at any level, which is entirely wrong.
The highest rate of tax in this country is 40 per cent. That rate affects people with earnings in the middle £30,000s and includes people who are in no sense rich. It includes people who are at senior levels in the teaching profession and, in some cases, at senior levels in the nursing profession. Once that level has been reached there is no further increase whatever in the rate of tax for those who have much larger incomes and who could afford to pay much more.
We propose that there should be a higher rate of tax at 50 per cent for those with incomes over £100,000. I believe that anyone would recognise that someone with an income of £100,000 is clearly well off and well into the higher levels of income. People in that category—many Members of your Lordships' House, including myself are among them—could afford to pay more in so far as their incomes exceed £100,000.
At the other end of the scale, we have always pointed out that a greater benefit to those with lower levels of income would be achieved by removing the 10 per cent rate and replacing it with a zero rate. Increasing the personal allowance would take more people out of the tax system altogether and would be more effective in helping those at the lower levels of the income scale than having a lower introductory rate. We believe that the Government's commitment at the previous election that they would not raise the rates of income tax was a serious error that has prevented them from using a most effective tool in making taxes more

1105
progressive. We hope, although we fear that it will not be the case, that the Government, in their manifesto, will not make a similar commitment in relation to what will happen if they are re-elected.
The second main criticism of the Budget is quite different. Once again we are faced with a Budget—this year containing exactly 300 pages—that achieves very little. As someone whose legal practice has included a certain amount of tax work, it has always seemed to me that broad simplicity is desirable, rather than fiddling with taxes—a little bit here and a little bit there—to achieve minor improvements.
It is clear that many matters like venture capital allowances or extra allowances for share options and so on are ineffective in economic terms. If something is worth doing, it is worth doing under a neutral tax scheme. If tax concessions are needed, it is doubtful whether that is an effective economic use of the money. We have far too many fiddly little bits and pieces when we should look for something a great deal simpler. Consider, for example, the tax avoidance schemes created by the business enterprise scheme introduced by the previous government. I believe that some of the schemes introduced by the present Government also lead, perhaps on a smaller scale, to that kind of problem.
A Budget of this kind is yet another example of the justification for splitting the Finance Act into two Acts: one for setting the rates and what needs to be done year-by-year on a regular basis, and one for dealing with the more technical aspects. I believe that this is a missed opportunity to simplify the tax system, or at least to avoid complicating it, and a missed opportunity to make our tax system more progressive than it is now.
Lord Marlesford: My Lords, perhaps I can speak in the gap to raise a similar point to that of my old friend the noble Lord, Lord Goodhart, but from a different point of view.
We are in the fourteenth year of a top income tax rate of 40 per cent. I believe that that has been of inestimable value to this country. In European terms, it has made us a tax haven, something that is deeply resented by some other EU countries, particularly the socialist Government of France. I believe that this country owes a deep debt of gratitude to my noble friend Lady Thatcher, when she was Prime Minister, and particularly to my noble friend Lord Lawson for introducing that in his 1988 Budget.
New Labour was elected on a self-denying ordinance not to dim that jewel in the Tory inheritance and it has stuck to that ordinance. However, so far the Chancellor has failed to indicate whether he will renew such a pledge in the manifesto. It is not on the pledge sheet. We shall be interested to see whether the noble Lord, Lord Goodhart, has succeeded in making a late change to the manifesto, or perhaps the manifesto already says what he wants.
I remind your Lordships that the last time a Labour government were in power, they left with a 98 per cent top marginal rate tax and that rate of tax came into effect at a threshold in today's prices of slightly over £78,000 a year.
1106
The noble Lord, Lord Goodhart, explained that the Liberal Party would like a much higher rate of tax and went on to refer to the 50 per cent rate. His party may be aiming to try to attract some of those voters who have been disappointed that new Labour has to some extent proved to be new Labour. However. I do not know whether the electoral arithmetic will be particularly attractive.
Lord Lawson of Blaby: My Lords, I thank my noble friend for giving way. I am grateful for his remarks about me, but he pointed out that the pledge given at the previous general election has not so far been reiterated. I am sure that it will be. However, does he not agree that the doubt is highly undesirable and that until it is cleared up it is necessary that the Prime Minister and the Chancellor of the Exchequer are probed and pressed at every opportunity in order to make the position clear?
Lord Marlesford: My Lords, I totally agree with my noble friend. The Government may believe that the presence or absence of such a pledge will make relatively little difference to the result of this general election. However, perhaps I may point out to them that if they do not renew that self-denying ordinance, they may, if re-elected, be tempted to return to the bad old days of bad old Labour and the absence of that pledge will have a considerable effect on the next election.
The Earl of Northesk: My Lords, I begin by offering the apologies of my noble friend Lord Saatchi that he cannot be here today. I hope that your Lordships will not consider me too poor a substitute.
The Bill may not be as bulky as the Chancellor's efforts last year but none the less it is a very full Finance Bill. That is evident from the Minister's introduction. It runs to 300 pages in 111 clauses and 33 schedules. Despite that, like the noble Lord, Lord Goodhart, I do not propose to detain the House for long.
As the Minister pointed out, a large part of its content, the 34 clauses of Part II as well as seven schedules, is taken up with the aggregates levy. It seems to me that this is a classic example of the Chancellor's approach to taxation; an ill-formed proposition with generous dollops of tinkering, obfuscation and complication, all to no good effect. As my honourable friend Oliver Letwin commented in another place:
"It is a principle of taxation that it should be simple, cleat and transparent, but this measure is not simple, clear or transparent".
Moreover, as my honourable friend also observed:
"this tax is irrational and is being introduced in the wrong way. It has the wrong powers of enforcement and it will cost jobs. Even more than all that, though, it is an empty box. Almost everything that will bring it into effect will come in a series of regulations that the House will never seriously debate".—[Official Report, Commons, 23/4/01; cols. 86 and 71.]

1107
That should force us to contemplate how much more coherent the regime of the levy could have been had it been scrutinised in greater detail by your Lordships; that is to say, had my noble friend Lord Saatchi's House of Lords Financial Powers Bill been on the statute book.
That contention is all the more persuasive on the basis of some simple arithmetic. The Chancellor delivered his Budget speech on 7th March. Today is 10th May. The Government have had no difficulty in progressing the Finance Bill through another place within that timescale; within two months.
That provokes two conclusions. First, despite the earnest efforts of my honourable friends so to do, some doubt must attach to how effectively it has been scrutinised. This argues fiercely in favour of your Lordships being afforded a proper bite at the cherry. Secondly, and possibly more importantly, there can no longer be any justification whatever in the future for offering up the Finance Bill for debate in this House in the moribund backwaters of parliamentary time.
As your Lordships will be only too well aware, both those ambitions lie at the heart of my noble friend's Bill. Indeed, I emphasise that we on these Benches intend to pursue this strenuously not on our own behalf but in the interests of strengthening Parliament and of giving taxpayers a fairer deal than the somewhat shabby offering of stealth taxes amounting to £36 billion over the life of this Parliament that they have at the moment.
No doubt we shall have the opportunity to put my noble friend's proposition on to the statute book in the future. In the meantime, I take this opportunity to hark back briefly to the historical approach of this House; that is, to make a few general observations about the state of the economy. The Government are adept at crowing about their management of the country's finances. The Minister waxed lyrical yet again today. Sound-bite mantras drip effortlessly from the tongue to explain the miracle of Labour's conversion to economic competence— no more boom and bust and the like.
A particular assertion—and the noble Lord made it again today—is the Chancellor's claim to have repaid £34 billion-worth of debt. And yet, according to the Treasury's own figures, no sooner has this debt been repaid than the Chancellor avers his intention to borrow exactly the same sum; £34 billion.
It seems to me that there is another curious coincidence here; namely, that the current debt of British Telecom all but matches that £34 billion. Why is that significant? Because of the £22.5 billion which the Chancellor raked in from the auction of 3G spectrum. In effect, a large proportion of the debt repaid, far from emanating from the fruits of sound economic policy, is derived from what, in terms albeit also with hindsight, was little more than an unwarranted windfall tax.
I do not gainsay the proposition that the UK economy is reasonably well placed to weather the storm of the current global slow-down, but it is not
1108
wholly insulated from it. And it is perhaps too easy to be cynical. None the less, the timing of the election is fortuitous. The kind of economic picture we could be looking at after the election—some of the signs are perhaps there in the shape of Llanwern and Bathgate and last month's figures for industrial production as a whole being 0.1 per cent lower than a year ago—puts the skids under the Chancellor's apparent confidence. After all, data emerging from the United States recently suggest that its economy is still running at a very real risk of recession.
I simply suggest therefore that a suitable epitaph for this Government's management of our economy is to be found in the words of my noble friend Lord Saatchi:
"No wonder he [the Chancellor] put VAT on spectacles: it was so nobody could see what was actually going on!"—[Official Report, 14/3/01; col. 913.]
Lord McIntosh of Haringey: My Lords, I listened with great interest to what noble Lords said. I congratulate the noble Lord, Lord Goodhart, on his impromptu assumption of the role of Treasury spokesman for the Liberal Democrat Party. By reminding us of his party's promises at the previous election he has laid himself open to rebuttals. It is true that his party said that there should be an increase in the rate of income tax for better-off people. But he may or may not remember that at the same time his party indicated that there would be increased expenditure on schools, hospitals and public investment generally using the benefit of those higher rates of income tax.
What he may not have recognised, although I am sure that the noble Lord, Lord Newby, has been keeping in touch on a day-to-day basis, is that our actual improvements in expenditure in public investment have been far higher than those promised by the Liberal Democrat Party in its manifesto at the previous election, despite the fact that we have not increased rates of income tax.
Lord Newby: My Lords, first, I apologise to the House for being slightly delayed. Had the Liberal Democrats been able to implement their policy after the previous election and raised the additional income from increased taxation during the first two years of the Parliament it would have been possible to increase expenditure on health and education in years one and two, which this Government found themselves unable to do, and we would still have had the benefits of growth to put more expenditure into those subjects in years three and four. I therefore believe that his example of our tax policy is at best partial.
Lord McIntosh of Haringey: My Lords, I am very interested to see how that works out in the manifesto of the Liberal Democrat Party. We shall see what kinds of promises it makes on taxation and spending.
I am rather more interested in the comment of the noble Lord, Lord Goodhart, that our tax policy is regressive rather than progressive and that more of the improvements in the economy, which I believe he acknowledged, should have been based on income tax rather than other taxation. I believe that when the

1109
noble Lord looks at the outcomes of the past four years he should consider the changes which have taken place in the incomes of hard-working families. Living standards have risen by 10 per cent over the life of this Parliament. The measures taken this year alone will make the average household £240 a year better off, and the average household is nearly £600 a year better off as a result of the measures introduced in this Parliament. The point here, surely, is that this Bill and the policies of the Government over the past four years have given additional support to those who need it most.
Every child should have the best possible start in life and that is why we have concentrated on ending child poverty. The changes in the Budget, plus the children's tax credit and the extra £10 a week in the year in which a child is born, will help to lift 170,000 children out of poverty. During this Parliament the reforms we have made will lift a total of 1.2 million children out of poverty and will mean that the average household with children is £1,000 a year better off.
Lord Goodhart: My Lords, does the Minister accept that, while undoubtedly growth has had the effect of increasing the incomes of lower earners, as a group those on the lower deciles of the scale pay a higher proportion of the total tax burden than previously?
Lord McIntosh of Haringey: My Lords, we must take into account not only the tax system but the credit system and the net effect on those with lower incomes. I believe that the figures that I have given are incontrovertible. If one takes that wider view, there can be no doubt that the answer to the charge that taxation policy has been regressive is to be found in the figures that have given. If one looks at the net results of the Government's taxation and benefit policy over the past four years, there can be no doubt that those in our society who were worse off are now substantially better off. That deliberate policy has been successfully pursued by the Chancellor over the four-year period.
The noble Lord went on to make a point, which is always made on these occasions, about the complexity of the Finance Bill. I acknowledge that this is a complex Finance Bill. It is not as long as some others. The Bill has been produced rather more rapidly than some others, for reasons that are well known and are common to all governments that announce elections before the end of a full five-year term. In those circumstances, it has been necessary to programme the Bill in another place.
We have continued to rely on the constitutional conventions regarding the role of this House in taxation which go back much further than the Parliament Act 1911. Those conventions go back even further than the resolutions of the House of Commons in 1670s; they date virtually from a medieval division of powers, and long may that continue. It is entirely right that a largely unelected Chamber should have no power of taxation.
1110
The noble Lord, Lord Goodhart, raises a legitimate point about complexity, but unless he is prepared to say which parts of the complex Finance Bill he is willing to sacrifice it is not easy to support him in his aim. The most serious charge levelled against the Bill in another place this week was that it was intensely boring. If possible, all Finance Bills should be boring rather than threatening.
I was interested in the exchange between the noble Lords, Lord Marlesford and Lord Lawson. However, the noble Lord, Lord Lawson, would be the last person to expect me to anticipate the Labour Party's manifesto. Fortunately, the Conservative Party's manifesto became available this morning. But both noble Lords will have to consume their souls in patience until they see what commitments are made.
I was particularly interested in the observations of the noble Earl, Lord Northesk, about the aggregates levy in relation to scrutiny by the House of Lords. I am not quite sure how the House of Lords can exercise greater scrutiny, or show greater expertise, unless he believes that a very significant number of Members of your Lordships' House own quarries. I am not certain that that is a particularly good qualification for considering the aggregates levy. This is part of our multi-faceted approach to environmental sustainability, and it is proper that the elected Chamber should consider it and make decisions upon it.
I turn to the claim of the noble Earl about soundbite mantras. I referred earlier to the longest period of sustained low inflation since the 1960s; the stability of interest rates and their lowest level for 35 years; the highest level of business investment in 40 years; the lowest unemployment level since the 1970s, with youth unemployment cut by 80 per cent and more people in work than ever before. They might be soundbites, or even mantras, but they are a fairly effective justification for the economic policies of this Government. The final expression of those policies in this Parliament is the Finance Bill which I commend to the House.
On Question, Bill read a second time: Committee negatived.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), Bill read a third time, and passed.

Consolidated Fund (Appropriation) Bill
2.9 p.m.
Brought from the Commons, endorsed with the certificate of the Speaker that the Bill is a Money Bill, and read a first time.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), Bill read a second time; Committee negatived; Bill read a third time, and passed.

Rating (Former Agricultural Premises and Rural Shops) Bill
2.10 p.m.
Brought from the Commons on 9th May and printed pursuant to Standing Order 50, and read a first time.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May)
Lord Whitty: My Lords, I beg to move that this Bill be now read a second time. The Rural White Paper Our Countryside: the future, which we published last November, sets out the Government's comprehensive strategy for rural communities and the countryside. We have already pushed ahead with many of the initiatives and measures in the White Paper.
The Bill contains two important measures that are part of implementing our strategy: first, to assist farm diversification; and, secondly, to help maintain village services. These are now all the more important, as they will also help with the longer term effects of the outbreak of foot and mouth disease.
The Prime Minister launched the Action Plan for Farming on 30th March last year. That promised measures to help farmers diversify into nonagricultural businesses as a way of supporting or supplementing their agricultural activities. One way of doing that is through relief from business rates.
Last August we consulted on rate relief for farmers who diversified into horse enterprises. The response to that consultation made clear that there was a far wider range of potential diversification businesses. We therefore consulted again last November on proposals for rate relief for all types of farm diversification. These would have limited rate relief to farmers for newly established enterprises. We listened to the response to that consultation. The Bill reflects the resulting changes to the proposal. It will provide rate relief to all small properties which were previously in agricultural use, whoever occupies them, whether it be a farmer owner-occupier, a tenant farmer, or a third party.
The Bill introduces a rate relief scheme for new, small-scale farm diversification enterprises. It allows rate relief to all small properties occupied by any enterprise which is newly established in former agricultural premises. That includes those run by tenant farmers and those where the farmer lets or sells the property to a third party. Farms are already fully exempt from non-domestic rates. But as soon as any part of a farm is used for anything other than agriculture, it becomes liable for rates. For example, when a barn is converted to a shop or to livery stables it becomes rateable.
These types of activity can provide a useful supplement to a farmer's income. But the costs of using part of their farm in that way are increased by the additional rates bill on property that was previously rate free. That is seen as a major disincentive to diversification. To help farmers establish new
1112
diversification enterprises, the Bill would provide rate relief to reduce the costs of doing so. Relief would be available to any small rateable property that previously benefited from the agricultural exemption from rates.
Relief would be on similar terms to that which already applies for village shops. There would be a 50 per cent mandatory relief and local authorities would have the discretion to increase that to 100 per cent. It would be limited to properties below a certain rateable value, set by order, which we intend to set initially at £6,000. It would be reviewed at subsequent national revaluations to ensure that it keeps in line with any general changes in rateable values. For a property of the maximum size, 50 per cent relief would be worth £1,290 in this financial year and 100 per cent relief would be worth £2,580.
The scheme would be available initially for five years. It would then be reviewed and extended if necessary. The review would need to take into account the possible availability of rate relief to all small businesses, as proposed in the Green Paper on local government issued last year.
If the farm diversification scheme is extended, relief would only be available to any individual property for a maximum of five years from when it first received the relief. That is because the relief is intended to help farmers establish new diversification businesses, rather than provide long-term subsidy.
A rating concession is already given to stud farms that are on agricultural land. These currently receive a flat-rate reduction in their rateable value of £2,500, which is worth £1,075 in this financial year for all stud farms. For the smallest stud farms it amounts to a complete exemption from rates. Because of that existing concession, which is not time limited, new stud farms that qualify for it would not also receive the new farm diversification relief. However, when the farm diversification relief comes into effect we will raise the stud farms concession to a £3,000 reduction in rateable value. That would be worth £1,290 in 2001–2002, which is the same as the maximum mandatory relief under the farm diversification scheme. For most stud farms it would therefore be worth more than the mandatory farm diversification relief.
For those with gross rateable values below £6,000, the £1,290 stud farms concession would be more than 50 per cent of their rates bill. It would be worth the same to those with gross rateable values of exactly £6,000. It would also be available to stud farms with higher rateable values, which would not be eligible for the farm diversification relief. Similarly, it would apply to existing stud farms, including those established in premises that were not previously agricultural, which would not qualify for the farm diversification relief. Stud farms that would otherwise qualify for the farm diversification relief would be eligible for the discretionary element of the new scheme. That means that local authorities would be able to top-up relief to 100 per cent, on top of the stud farms' concession for that five-year period.

1113
I now move on to the mandatory relief for village food shops. In 1998 we implemented the village shop rate relief scheme. That provides 50 per cent mandatory rate relief to the sole small general store and post office in designated villages with a population below 3,000. Local authorities can give discretionary relief up to 100 per cent to these and any other small businesses in such villages. The scheme is intended to provide support to essential services in isolated rural communities. We want villages to be active living communities where people are also able to meet their essential needs. The most basic community service for most rural communities is the local shop. We want to retain shops in small communities offering a wider range of products and services.
The Green Paper on local government finance published last September suggested extending the mandatory rate relief to other food shops, pubs and petrol stations. We have already implemented the extension of mandatory rate relief to the sole small pub or petrol station in small villages, through secondary legislation. That took effect on 5th April 2001. The Bill would do the same for all small food shops in those villages.
At the moment, where there is one general store selling food it gets mandatory rate relief. But where there are two—for example a grocer and a butcher—neither gets mandatory relief. Some local authorities already give discretionary relief in such cases. But the Bill would ensure that all food shops get mandatory relief in those villages. Primary legislation is needed because the current legislation specifically limits mandatory relief to the sole general store selling mainly food and household goods. That cannot be overridden by orders made under the power used to extend the relief to pubs and petrol stations.
Mandatory relief would be extended to shops that mainly sell food for human consumption, as these are all equally essential to the community. Separate butchers, bakers and grocers provide the same service to a village as a general store that provides a wider range of foods. Shops that sell other goods or services, subsidiary to their food sales, would also be eligible for the mandatory relief. But it would not extend to shops which are, for example, mainly confectioners, tearooms, restaurants or takeaways. These catering businesses do not provide the same essential community service as shops that provide basic foodstuffs. However, shops that sell basic foodstuffs but also provide hot food or confectionery would still get the relief', provided that those catering and confectionery activities accounted for less than half of their trade.
Relief would be given on the same terms as that for sole general stores and post offices, limited to properties with a rateable value of less than £6,000. Again, local authorities would have the discretion to top up the 50 per cent mandatory relief to provide 100 per cent relief where needed. They would also retain the discretion to give relief to any business in a designated village with a rateable value up to £12,000 if it is of benefit to the local community, including those providing mainly catering or confectionery.
1114
The Bill amends the main rating legislation, the Local Government Finance Act 1988. Therefore, it extends to England and Wales. The new order-making powers would be exercisable in Wales by the National Assembly, including setting rateable value thresholds, and commencement and possible extension of the farm diversification scheme.
The two measures in the Bill would provide welcome financial assistance to small rural businesses; they would help reduce costs for farmers who wish to diversify; and would provide more rate relief to village food shops. This further support to rural businesses takes forward the policies set out in the Action Plan for Farming and the Rural White Paper. It would be even more welcome to help with the long-term recovery in those areas from the current foot and mouth outbreak. I commend the Bill to the House.
Moved, That the Bill be now read a second time. —
(Lord Whitty.)
2.20 p.m.
Baroness Byford: My Lords, I rise to give support to the measures proposed in the Bill before us today. I would also add that these measures were first called for some three years ago by my honourable friend Jim Paice. That is recorded at col. 1172 of Hansard of another place of 21st May 1998. It is a great pity that it has taken three years of deep declines in farm incomes and the outbreak of foot and mouth to stir the Government into action. At this stage, I should remind the House of my family's farming interest. which is entered in the House's register of interests.
We have seen the incomes of farmers fall dramatically. Deloitte & Touche published an analysis of farm incomes last October, before the foot and mouth outbreak. It showed that the average sized farm of some 500 acres, which earned £80,000 in the mid-1990s earned only some £8,000 in 2000. That same sized farm is estimated to make a loss of some £4,000 in 2001. Consequential to that loss are the jobs of some 47,000 farmers and farm workers, who have left the industry over the past two years. Agriculture's contribution to the nation is now down to just 0.80 per cent. It was 1.6 per cent just five years earlier. Its contribution has halved thanks to many of the Government's policies.
The Bill will give statutory rate relief of 50 per cent on rates levied on former agricultural buildings with a rateable value of £6,000 or less that are to be used for non-agricultural enterprises. The limit of £6,000 on rateable values contrasts with the definition of small business in the Green Paper on local government finance as one which occupies space with a rateable value of £8,000 or less. It contrasts even less favourably with that offer of hardship rate relief to businesses in rural areas targeted at businesses with a rateable value below £12,000 announced by the noble Lord on 23rd April this year. Will the Minister comment on the level of diversification that the Government expect to achieve by using a £6,000 limit?
The scheme is set to run for five years. I understand that it will be reviewed again after that period. Will the five-year period be extended to someone who enters

1115
the scheme in year three, or will that person receive relief for only two years? It is important that this issue is clarified to ensure that the person wishing to diversify has a sound financial base on which to build his business. Is the Minister confident that businesses which have been caught up in the foot and mouth outbreak and whose animals were slaughtered at its start—as early as last February—will be able to qualify within the 183 days laid down in the Bill for those farm buildings that have been used for agricultural purposes? It would be appalling if the very people whom the Bill is intended to help should be jeopardised in any way.
Will the Minister explain why a fiscal limit on rateable value is preferred to a limit on an area of premises involved? The latter—the area of premises—would surely be a fairer way to view the differences of rateable values across the country. One has only to look at the difference between schools to know that the value varies enormously even within a county. Will the Minister confirm that the limit of £6,000 will apply to buildings being used and will ignore common access, parking, shared toilets or secretarial facilities that might be possible on that land? Will the Minister clarify whether the relief will be restricted to a single business over five years? For example, what will happen if one company which starts in year one either fails or moves away in year three and the building falls vacant?
I understand from the Explanatory Notes that it is for the local authority to decide which of its communities located in a designated rural area meets the qualifying criteria and to place them on the rural settlement list. The rural areas themselves are designated centrally by government. Will the Minister clarify how many rural areas are so currently designated and whether a local authority can request an additional area to be included? My understanding is that there is no legislative definition of a designated rural area. Perhaps the Minister would like to comment on that.
I further understand that the department decrees that rural areas must be a given distance away from built-up areas and that they are physically separated from them. Will that disadvantage farmers whose buildings are closer perhaps to an edge of a town or a larger village? Will it be possible for one part of a farm to be classified as rural while the part containing the buildings for diversification might not be so?
Much debate took place in another place on the question of equestrian businesses that are currently worth some £2.5 billion to the nation. My honourable friends Owen Paterson and James Gray argued at great length during the proceedings of the Bill about the anomalies within the "horse world". I wonder whether the Government have had second thoughts about the additional variations to the Bill in favouring new businesses against those that are already established. Many of the already established businesses are going through difficult times. Those existing businesses have been devastated by the restrictions that the foot and mouth outbreak has
1116
brought to them. Those very same establishments would not qualify for help under the Bill. Have the Government reconsidered the suggestion that the only way to tackle the problem of equestrianism is to provide full agricultural exemption for old and existing equestrian businesses?
I turn to Clause 3 of the Bill, which refers specifically to village shops. I should again declare an interest as Patron of VIRSA, an organisation which helps to promote and encourage shops. Clause 3 deals with rate relief for rural food shops. While this inclusion is welcome, I am concerned that the Government have not taken fully on board the dire circumstances in which many shops presently find themselves. The incomes of many in an infected foot and mouth area have virtually dried up completely. Even now, when fewer daily outbreaks of the disease are being reported, some of those shops are still experiencing a lack of visitors. The Government have made welcome additional announcements of financial help. But I have to say to the noble Lord that many organisations and individuals have been in contact with me. They feel that some of these moves, while welcome, are totally inadequate to deal with the situation.
We on these Benches welcome and support the Bill. It is more than necessary, particularly at this time. However, bearing in mind our contracted discussion today, I should be grateful if the Minister could respond to my questions before we move on to consider amendments in Committee.
2.30 p.m.
Baroness Miller of Chilthorne Domer: My Lords, we on these Benches welcome the Bill and believe that it demonstrates a move in the right direction. The noble Baroness, Lady Byford, pointed out that her honourable friend had called for these measures some time ago. I must tell the House that Liberal Democrat local authorities up and down the country have been implementing all the discretion they have at their disposal as regards offering rate relief to rural businesses. They, too, will welcome this extension of relief to support the struggle to maintain the kinds of services that we all agree are necessary.
I shall deal first with the agricultural part of the Bill, on which I should like to raise two points with the Minister. First, why have the Government found it necessary to repeat what I believe to he a mistake when addressing farm enterprises; that is, to continue with the practice of designating rural areas? Wherever it is situated, a farm may need to diversify. It could be on the edge of a town or even in a semi-urban area, but that makes little difference to the farming process. Continuing with the designation of rural areas simply adds to the red tape and difficulty of implementing this Bill. I believe that it would have been better if all farm enterprises had been able to qualify.
I hope that the Minister will be able to comment on why it was felt necessary to continue with the practice of designation, which I believe is merely a hangover from previous years. Indeed I, too, shall be interested in his reply to the question put to him by the noble

1117
Baroness; namely, what would happen if a large holding fell into both a designated and an undesignated area, so that some of its buildings might be in the wrong place?
Secondly, I wish to question how firmly in reality are the provisions of this Bill based. Certainly if it was not being introduced at the end of this Session, the Liberal Democrats would have proposed a large number of amendments to it. The fact that we have not done so indicates that we shall welcome its inclusion in the statute book, but I do not believe that it recognises the reality of life in rural areas today. The Bill is too prescriptive as regards what diversification may mean for farms and ignores the reality of village life. Perhaps I may explain exactly what I mean by that statement.
The Bill attempts to define which enterprises can be helped within a village by suggesting that such enterprises should provide essential village services and that their turnover in food should comprise more than 50 per cent. However, it is a fact that nowadays one might find that an Internet café had been established. Its main turnover would not be in catering, through supplying coffee, cakes and so forth to those coming into the cafe to use the essential service of Internet access. I understand that, under the terms of the Bill, such a business would not qualify for any relief because more than 50 per cent of its income derives from the catering element. However, all of the other facilities available to the people living in that village may have closed down. Such a circumstance clearly does not recognise the way in which village life is developing.
For example, if a shop sells those goods which it is essential to purchase fresh each day, such as bread and vegetables, it should be recognised that those goods have quite a low value. Their turnover value may well be low but, again, it could be that the specialist café element of the enterprise attracts people to the premises. The cafe part would provide the highest turnover for the business as a whole, but would nevertheless support the fresh food outlet for the village. Again, such an enterprise would not qualify. I hope that the Minister will be able to explain the Government's thinking behind these provisions.
Some debate has concerned the position of third parties if they rent out farm buildings. Would such parties qualify for relief under this scheme? Can the Minister assure the House that they will do so, because if a farmer is seeking to diversify by renting out farm buildings at the attractive rate that inclusion under the terms of this Bill could offer, that would provide a powerful incentive to those considering renting such buildings?
I shall turn now to the matter of the five-year limit. This is most unfortunate and appears to have been applied in a very impractical way. For those businesses which have been affected by the foot and mouth crisis, it may well be that only in two or three years from now will they be able to think about diversification. They will then be eligible for only two or three years of relief. If they cannot establish themselves for four years, they will receive relief for merely one year. That is not as helpful as the Government would like to think.
1118
I understand that the Government have stated that it may be possible to extend the provisions of the Bill, but we on these Benches would prefer to see this as a "holding" measure until a proper local government finance Bill can be introduced. Such a Bill would return control of the uniform business rate to local authorities. Then we would not have to discuss which services were essential for a village because the village would be able to decide for itself and make the appropriate representations to the local authority. The . authority would then be able to consider the case. While governments continue to deny local authorities the proper discretion required as regards the level of local business rates, we shall continue to need to consider complicated Bills of the kind before the House today. That is merely trying to make the best of a difficult job. We would like to look forward to the time when the uniform business rate is returned to local authority control.
Finally, I should like to make two further points. First, can the Minister explain what will be the definition of micro and small businesses when considering the threshold for this relief? Between the DTI and the DETR there appear to be several different definitions of what constitutes a small business and whether such enterprises should be eligible for relief.
Secondly, I echo the point made from the Conservative Benches as regards the importance of the equestrian community and its significant contribution to rural areas. Undoubtedly the Bill takes a small step towards helping such enterprises, in particular those concerns which have diversified into other areas. However, once again, such assistance does not go far enough.
2.37 p.m.
The Earl of Caithness: My Lords, I declare again my interest as a trustee of a small property in Scotland which has farming interests. Having more freedom than the two Baronesses who have just spoken, I do not give the Bill such a warm welcome. However. the noble Lord will be delighted to hear that I do give it a guarded welcome and that is better than has been possible for some of the government legislation that has come before us of late.
My noble friend Lady Byford reminded the House that, under this Government, agriculture and the countryside have been facing increasing difficulties. They fell into deep trouble as soon as Labour came to power. Furthermore, as the noble Lord, Lord Whitty, will know, since the Prime Minister began to take an interest in the subject and appeared on the scene, the situation has only become worse. The real added value generated within this sector in the year 2000 was 1.7 per cent below that generated in 1997. That is a pretty severe indictment, given that other industries have generated on the plus side. Only agriculture and forestry have performed worse over the period. My noble friend Lady Byford also reminded the House that farm incomes have plummeted, while the rate of clearance of farmers and farm workers from the land is accelerating.

1119
All this happened before we were hit by the dreaded outbreak of foot and mouth disease. On the Friday following the Easter weekend, I drove from Moffat down through the Lake District, which had been terrific stock country. Over a distance of 60 miles, I saw precisely 20 fields of sheep on either side of the motorway. As soon as I came out of the foot and mouth affected area, I saw 20 fields of sheep over a distance of one-and-a-half miles. That is the scale of the desolation in certain parts of the country. Farmers in those areas have to face that on top of the already bad situation.
There is no simple way of knowing the scale of farm diversification, let alone the income that is derived from it. Opportunities will vary from area to area. In some areas there will be far too much diversification; in others there will not be enough. That is because the Bill, as the noble Baroness, Lady Miller, said, is far too prescriptive; it does not allow villages and agricultural areas to decide what is best for them. That would be wrong so far as the Government are concerned. Communities are being told that if they fall within a designated area they can have help—but that help may be needed in an area that is not designated. That will lead to further difficulties and resentment within the countryside and the farming communities.
Without question, parts of the Bill are complete nonsense and need careful scrutiny and discussion, but we are prohibited from doing that. I will highlight at Committee stage one particular area of concern which exemplifies the stupidity of some of the Government's proposals.
I should like to ask the Minister about town and country planning issues, where I anticipate major difficulties will arise. It is a basic principle that we prevent isolated developments away from centres of population unless they are for agricultural or forestry use. Many farmers are meeting resistance to diversification schemes from local authorities even though there has been a relaxation. The Government's proposed further relaxation can lead only to more difficulties in the future. Can the Government offer any further advice to local authorities on how they should handle these very difficult and sensitive issues?
I remember trying to encourage farm diversification when I was a Minister. Although one tried to help with one hand—as the noble Lord, Lord Whitty, will fully understand—the next people through the door were the preservationists, who wanted no change at all within the countryside. But the countryside is a living environment of people and animals and it must adapt. Parts of the Bill will help it to do so.
Finally, on a general point, I hope that the Minister agrees that farmers are the key to the future of the countryside. I hope that the Government will undertake a wide-ranging review of how the countryside will work in the future—particularly after the devastation of certain areas by foot and mouth disease. I repeat the call that I have made on more than one occasion to the Minister of Agriculture that there should be a Royal Commission to look into this issue,
1120
starting now. When it comes to looking into the future, I hope that the Minister will make certain that the points raised today about the restrictive nature of the Bill and the importance of making it wider and more applicable across the whole country will be taken into account.
2.43 p.m.
Lord Whitty: My Lords, there have been varying degrees of warmth of support for the Bill from noble Lords who have spoken. The Bill will be welcome in many parts of the country and will make a contribution towards resolving some of the wider questions which have been addressed today in terms of agricultural decline and the problems of rural areas, particularly those afflicted by foot and mouth disease.
The Bill is a limited but very important piece of legislation for breathing life into enterprises within the countryside. The introduction of the new rate relief will help both farmers and village communities. The Bill's proposals follow through some of the commitments that we made in our rural policy White Paper and action for farmers.
However, some of the issues raised today are not dealt with in the Bill. I do not therefore intend to reply in detail on wider issues of agricultural policy, local government finance or the planning system as a whole. The Bill needs to be taken for what it is and I shall confine my response to issues which form specific parts of the Bill.
The noble Baroness, Lady Byford, raised the issue of the threshold and asked a number of other questions in relation to that. She asked why the threshold was £6,000 in this context whereas in the context of support for other small businesses the threshold is £8,000. I should point out, however, that that support is tapered above the £6,000 level in the context to which the noble Baroness referred. There obviously has to be a cut-off point. The figure of £6,000 is the cut-off point of mandatory 100 per cent relief. However, contrary to what has been implied by some noble Lords, particularly the noble Earl, Lord Caithness, local authorities have a further discretion over and above this figure to provide rate relief up to £12,000 rateable value, 75 per cent of which will be refunded from central funds. There is therefore more flexibility and more scope for local discretion than has been implied today.
The noble Baroness asked whether the £6,000 threshold includes common assets. The answer is perhaps not entirely satisfactory: it depends upon the property. The rateable value of £6,000 will relate to the unit of property; whatever is covered in the rateable assessment will be included. If there is a supportive service in a separate rateable property, that will not have undergone the same change of use. Obviously how that applies from case to case will depend upon the layout of the buildings on which the rateable value will have been assessed.
The noble Baroness asked whether the rate relief will apply to farms which have only recently diversified and how far back it will extend, particularly in the light

1121
of foot and mouth. In order to qualify for the relief, properties would have to be used for agricultural purposes for at least half of the 12 months immediately before the Act comes into force. This is to avoid complicating a situation where there are seasonal differences. For example, if, as a result of foot and mouth disease, a barn has not been used but is still there for agricultural purposes, then it remains an agricultural purpose building and is rated as such. It would have a continuous agricultural use connotation and would be eligible.
The noble Baroness also asked about what would happen if a business changed hands after diversification. Rate relief will be given for five years per property for as long as the scheme lasts. I shall come back to the scheme in a moment. If it is granted for five years, when the business changes hands it will continue to enjoy the rate relief for that period.
Baroness Byford: My Lords, my question was that if I, as a person to whom rate relief was given, stayed in the property for three years and then moved on, would anyone who came in and took over that property have two years of rate relief to run or would be or she have five years to run?
Lord Whitty: My Lords, it will be granted for five years per property for as long as the scheme runs. The new person would have only the outstanding two years, unless there is an extension when we come to review the situation. If the property was used for non-agricultural purposes, the relief would run for five years, whoever owned it and whatever the nature of the non-agricultural activity within that property.
The noble Baroness also asked about horse enterprises. When we started on this trial, we had horse enterprises very much in mind and consulted on the proposed new rate relief for farmers who were thinking of turning over part of their property to horse enterprises. The result of the consultation was that it would not be sensible to confine the proposals to horse enterprises. We therefore did not proceed with those proposals but subsumed them into our proposals for rate relief on all new enterprises on farms. Other equestrian activities, such as stud farming and so on, are also dealt with in the proposals.
The noble Baroness asked why we had based the limit on rateable value rather than on the size of premises. The reason is that the rating system is immediately available and the local authority knows the rateable value of every building; it does not necessarily know the dimensions of properties by area or size. So it is a question of administrative convenience rather than anything else.
Perhaps I may return briefly to the question of why all equestrian premises should not in effect be classified as agricultural. All non-agricultural activities, whether or not they involve horses, are treated in the same way. It would have widespread implications were we to reclassify equestrian outlets as agricultural.
1122
The noble Baronesses, Lady Byford and Lady Miller, raised the question of why we are using the designation "rural areas" and how it operates. "Rural areas" are based on parish council areas. They are identified with the co-operation of the local authority. Up to 10,000 have been identified following the coming into effect of the Local Government Act 1997. The use of such a designation has been reasonably successful. If areas have not been so designated but have communities of fewer than 3,000, they could immediately be added to the list; it is not restricted to the areas that already appear on it. The other point is that in relation to the diversification side, the list does not apply anyway. It is determined on the basis of property that has been used for agricultural purposes not in relation to the designation of rural areas. So the issue arises in relation to only part of the Bill.
The noble Baroness, Lady Miller, raised the issue of the Bill's restriction on what can be regarded as "essential" in relation to village shops. Our intention is that the Bill should cover the provision of mandatory relief. Again, there is some discretion in relation to local authorities and up to 75 per cent government support for local authorities extending their discretion in other areas. But we are concerned primarily with essential services. That is why we initially designated the "sole general store" and the post office and moved on to include all food provision. We regard those a s the essential services and therefore the ones to which mandatory relief should apply. Therefore, such enterprises as Internet cafés, while they may be highly desirable and may attract discretionary rate relief, are not the central part of the Bill, which is primarily about maintaining and extending services.
The noble Baroness also asked about the designation of micro-businesses. The £6,000 rateable value is based on the results of research in 1995 which showed the rates for a much higher proportion of costs for businesses with a turnover of up to £100,000. At that stage, businesses generally had rateable values of about £5,000. Upgrading that to current standards makes it about £6,000 in terms of 2000–01 rateable values. So there is a rationale, relating to the definition of micro-businesses.
I believe that I have dealt with most of the points that have been raised, except for the broader issues of planning referred to by the noble Earl, Lord Caithness. I have some sympathy with his point; however, to say that we should give heavier guidance as to how planning authorities should interpret their duties in respect of agricultural diversification runs slightly contrary to his assertion that these matters should be left to local decision-making and discretion.
We shall return to the other point raised by the noble Earl when we debate his amendment in Committee. It relates to why rate relief that was started within the five years but not at the beginning of that period should not extend beyond the five years unless the scheme itself were extended. The main reason is that. at any point, we are reacting to a situation that currently exists in rural areas and are applying a scheme which

1123
we believe is appropriate in encouraging and maintaining businesses in those areas. Whether the situation will be the same in five years' time, we shall need to judge closer to that date. Therefore, any extension beyond that and any commitment of funds beyond that would have to await that assessment.
In addition, we are addressing the issue of rate relief for small businesses as a whole. It is certainly hoped that within the next five years we shall arrive at a strategy to deal with small business costs in relation to rates more generally. While maintaining some support for rural businesses in a differential way, that may well be subsumed in a wider approach to small businesses by that date.
Baroness Miller of Chilthorne Domer: My Lords, I sense that the Minister is nearing the end of his response. I am anxious to have a reply, either now or in writing, on the issue of rental to third parties and whether the third party would be able to qualify for rate relief.
Lord Whitty: My Lords, I am sorry that I skipped that point. It was simply that the reply is unusually short. The answer is yes.
I believe that the Bill's provisions will be welcomed in many of our villages. It will be a welcome silver lining for a number of farmers who are presently experiencing severe financial constraints, not only on their main business but on their ability to diversify. I do not pretend that the Bill solves all the problems that such farmers face but it does provide some catalyst and incentive for them to move into new areas and transform village life. It also provides an incentive to village shops to maintain services to the community and to provide economic activity within villages which would otherwise lose their centres.
This is an important measure. It is one among many that we are in the process of bringing into effect in relation to rural policy. It is, of course, overladen with the current difficulties of foot and mouth and the impact of that on parts of the rural community. Nevertheless, the Bill provides a good basis for a medium-term revival of economic activity in many areas.
Lord Brennan: My Lords, I am grateful to the Minister for giving way. Perhaps I may ask him to confirm two points arising from the Bill. First, will be confirm that the passage of the Bill will not in any way diminish the efforts of the Rural Task Force to devise adequate means of compensation and rate relief for businesses and farms affected by foot and mouth disease? Secondly—and I ask the Minister's forgiveness if I have misunderstood the finance—will be confirm that nothing in the Bill will lead local authorities in rural areas to seek to make good any shortfall that it causes them by increasing the rates for those who are materially affected by the outbreak of foot and mouth disease? I refer especially to businesses that do not presently qualify under existing rate relief provisions.
3 p.m.
Lord Whitty: My Lords, as regards my noble friend's first point, I can tell him that the task force is clearly addressing the consequences of foot and mouth. Whatever policies are required to turn round and assist those areas most affected by it will be pursued. This Bill adopts an entirely separate approach to what is needed in that context. On my noble friend's second point, the discretionary area already exists for local authorities. The central funding is 75 per cent. However, for the mandatory areas for which this Bill provides, the central funding will be 100 per cent. Therefore, it would not lead to an additional rate burden being imposed on other rural enterprises or on rural residents.
Baroness Byford: My Lords, I thank the Minister for answering quite a few of the questions raised today, but perhaps I may pursue just a couple of them that need further clarification. The noble Lord, Lord Brennan, picked up on the very issue to which I wish, first, to return. There is obviously no argument on the mandatory effects of the Bill; it is a question of where discretion will be exercised. The Minister said that local authorities will have discretion to give greater help to those businesses, but some of those rural businesses are actually very short of money. Although I am sure that the Minister will deny this, yet again, across the Dispatch Box, I believe that the standard spending assessments are inadequate for some of those rural areas. Indeed, this will put extra pressure on them. I should like the noble Lord to comment on that issue.
Secondly, under today's proceedings, we do not have the opportunity to look through the Hansard report to check the Minister's response. However, I believe that he referred to "administrative convenience". I get worried when I hear such phrases. I thought that we were here to serve the population and to make it possible for people to have access to information regarding the measures that we are taking, rather than such access being subject to "administrative convenience". I was somewhat alarmed by that comment.
Thirdly, I return to the question that I raised on the whole issue of the five-year lag. I still have great reservations as regards the fact that the Minister indicated that it is only a one-off term of five years. If, as I said, someone moves into a property and manages to build a safe and successful business but then moves on because it outgrows the building, that farmer will only have two years left to offer any other incoming person. That seems to me to be very short-sighted. I know that the Bill stipulates a five-year term, but that is a short-sighted view because—I am sure that others will agree with me—it will not encourage anyone to come in and undertake a business proposition if he has only a two-year, rather than a five-year, base upon which to work. Can the Minister comment further in that respect?
I turn now to the reason why the Government decided to go down the rateable value route rather than taking account of the actual square footage

1125
involved. I hope that the Minister will acknowledge the fact that rateable values vary enormously. Indeed, in the North, the rateable value for a particular property like the one that I have in mind could be very much less than its equivalent in the South. Obviously people in the South also need help and support, but it seems to me to be illogical that this Bill does not recognise the variation that will occur across the country. If the assessment were made on the square footage, or whatever, the rateable value of the property would not matter. It alarms me that the Bill is inflexible. as suggested by my noble friend. I do not know what we can do at this late stage, but, bearing in mind the strong vibes that I hope we are sending to the Government across the Chamber, I wonder whether the Minister could reconsider the matter.
Before I conclude, I should like to return to the equestrian issue. When responding in Committee in another place, the Minister gave an assurance that such discussions would continue but added that other events might take precedence. That is fine; but we are here making Bills. We should not be creating loopholes just because we are nearing the end of a Session. Perhaps the Minister could give me slightly more clarification in that respect before we move on.
Lord Whitty: My Lords, as my noble friend the Chief Whip is sitting beside me, I am afraid that I cannot give the noble Baroness much comfort that we shall be considering these matters and coming forward with any amendments that address her concerns in time for the Committee stage, to which I believe we shall shortly be moving. Indeed, as regards the questions that the noble Baroness has just asked, I am not sure that we can resolve them in relation to changes to the Bill.
I believe that the noble Baroness's main concern related to the question posed by my noble friend Lord Brennan on the burden of rates on rural areas. I should point out that that is not a change that is brought about by the Bill: discretionary relief already receives 75 per cent central funding, but that means that 25 per cent must be found by the local authority. The Bill does not change the situation. In passing, whatever the noble Baroness's concerns may be about the relative position of rural counties in the SSA process, I should stress that they have received very substantially more money in absolute terms than they did during the latter years of the previous administration. However, we are not supposed to be political at this stage in our proceedings.
The noble Baroness's points about administrative convenience and square footage as against rateable value relate to the same issue. In immediate terms, it is easier for local authorities to check the rateable value and, therefore, to get the process into operation rapidly. It would not serve the interests of those who are seeking such relief in order to set up new enterprises, or to maintain their enterprises, if we were to require the local authority to check the square footage and work it out on that basis. I agree that there might be a slightly different impact in various parts of the country; but, nevertheless, we propose to use that
1126
system in order to get the scheme under way rapidly. That ought to be of benefit to rural areas rather than having another loop of bureaucratic administration.
In relation to the five-year lag, we shall return to those aspects shortly in. Committee. As for the question of hand-over from one company to another, it would be odd if, in the case of neighbouring farms, we were to give five years to one property that had diversified and yet award seven years, or whatever, to another property next door simply because the property had changed hands in the middle of that period. Of course, we may extend or subsume the scheme in an effort to show more widespread support for local businesses, and rural businesses in particular, at a later stage. We must maintain a degree of equity between the business that runs for the full five years and a property that changes hands within that period. Anything else would be illogical and inequitable.
With those final words for this Second Reading debate, I hope that we can proceed to further stages of the Bill. I commend the Bill to the House.
On Question, Bill read a second time.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), House resolved into Committee.
[THE DEPUTY CHAIRMAN OF COMMITTEES (Lord Ampthill) in the Chair.]
3.8 p.m.
Clause 1 [Mandatory rate relief on former agricultural premises]:
The Earl of Caithness The Earl of Caithness moved the amendment:
Page 2, line 18, at end insert ", except that subsection t6F) will continue to apply to any hereditament, subject to the condition in subsection (6G) being fulfilled, for a period of five years beginning with the day on which it first applies"
The noble Earl said: This is a subject on which we have already had rather more discussion than I thought would be the case. However, it is worth probing the Government's thoughts a little further.
The amendment highlights the rather short-term thinking of the Government. At Second Reading the noble Lord, Lord Whitty, made clear that the scheme was to run for a five year period. As I am sure the Committee will agree, substantial difficulties arise in that connection. My noble friend Lady Byford gave the example of a business that started off with good intentions but after two or three years ran in to difficulties and folded. What would be the situation with regard to an incoming business?
I am also concerned about farmers who would like to diversify but who, for a variety of reasons, are not yet in a position to do so. They might need MAFF grants which will take time to be approved. Some planning permissions will also take time to be approved. That is why I referred to town and country planning on Second Reading. The noble Lord, Lord Whitty, did not want to be drawn too deeply into that quicksand. I hope that my noble friend Lord Dixon-Smith with his experience might be able to help the Committee on that matter.
If a local authority is reluctant to allow a change of use, a farmer may have to wait a substantial length of time to obtain the planning permission he seeks. However, the clock is already ticking. The farmer has to seek MAFF's approval for a restructuring scheme and then has to obtain planning permission. By that stage two or three years could have passed and the farmer has only a further two years of rate relief unless he is able to obtain further discretionary relief. That situation will encourage farmers to submit ill thought out proposals. There will be a rush to get on to the bandwagon to try to obtain the maximum benefit from the proposals. As I say, that will encourage farmers to submit ill thought out proposals.
The foot and mouth tragedy adds irony to the situation. Farmers in areas where there is foot and mouth disease who have diversified receive very little help from the Government and have been particularly heavily penalised. Farmers in such areas will be wary of undertaking further diversification unless long-term commitments are made to them. My amendment seeks to limit the scheme to a period of five years from the commencement of the diversification. If a farmer wants to diversify in, for example, 2003, the scheme would run to 2008. If he wants to diversify now, the scheme would run to 2006. I realise that that would be tough on the business that went bankrupt that my noble friend Lady Byford mentioned and even tougher on a business for which a two-year period applied. I do not seek to make the provision open-ended. I seek to make certain that the help that the Government are now offering is a pump-priming measure for five years from the commencement of diversification. I beg to move.
Baroness Byford: I support my noble friend's amendment, although I suspect that the Minister will be unable to do so. This is an important issue. As we are well aware, many farmers have had a dreadful time. They may have good reasons for not wishing to take advantage of the measure straight away. My noble friend mentioned some of those reasons. It is not clear whether the Government will consider the issue. I do not find it referred to in the business of another place. I may have missed the reference; I do not think so.
In a year's time a farmer may feel able to diversify. As my noble friend suggested, the farmer would be eligible to a period of only four years. If he waited two years, the period would be only three years. I return to my earlier point which the Minister was unable to take on board: it is much less attractive for another person to take on the business if the timescale is shortened. We sought to make clear that point at Second Reading. I support my noble friend.
Lord Dixon-Smith: I, too, support the amendment of my noble friend Lord Caithness. The principle he enunciates seems to me unexceptionable. I accept the procedural difficulties that we all face. However, even words of sympathy from the Minister at this stage would demonstrate some understanding of the situation. Perhaps something could be undertaken subsequently regarding the principle.
1128
The noble Earl raised the problem of planning difficulties which are a well-known quicksand into which changes of use in rural areas tumble rapidly. It is an area for which no applicant can be wholly responsible. The situation is even more vexed and difficult if he happens to be within the area of a national park where the planning situation, quite properly in many respects, is more restrictive. However, attitudes across the length and breadth of the country differ on these matters.
The crucial issue is that the relief should be available for the five-year period from the start of the diversification. The diversification cannot start until all the requisite permissions are granted. That of itself might take three or four years. If that were so, it would be nice to think that the relief would be available for that period. It is only occasionally the fault of the applicant that these matters run into the sand.
3.15 p.m.
Lord Whitty: The remarks of the noble Lord, Lord Dixon-Smith, allow me to indicate that were we not at this stage of Parliament, I might be sympathetic to the amendment. I understand the underlying problem to which noble Lords have referred. However, even were we to have more time at our disposal, we would be unlikely to accept the amendment. The noble Earl referred to the issue as short term. In a sense it is short to medium term. We are dealing with a situation which arises now. The measure is there to provide immediate help to those farmers who wish to diversify now into non-agricultural activities. The noble Earl rightly referred to other measures of support available from MAFF and others. But rate relief is an immediate and medium-term attractive support to farmers wishing to diversify their business; or to allow others to diversify their business on the properties. In one sense, therefore, it is short term and needs to be put into effect immediately. It meets a specific need which is clear at the moment.
The situation may change in five years' time. It is also true that if we had a huge take-up the scope for agricultural diversification would be limited by the existence of current buildings and so forth. So we are providing a scheme for a fixed period which will be known to potential ratepayers and the owners of that property. We have provided, if the situation is maintained and if the scheme works, for the extension of that period beyond those five years if the need is there.
I referred to the other change at the earlier stage. It is to be hoped that by that time a more general scheme for rate relief—it has been referred to in the local government finance Green Paper—may provide monetary relief to all small businesses which would be covered by the diversification scheme under the Bill, and many other schemes. If that is so, clearly one would have to adapt the scheme even if one wished to give further differential support to diversification at that stage.
With regard to businesses changing hands within the five-year period—perhaps I repeat myself—it is important to recognise that this measure relates to a

1129
property and not a business. Any new person taking over a diversified business, or a property already containing a previously diversified business, is not replacing agricultural activity. Therefore, it is not diversification in that sense. The offer of relief over five years is intended to provide an incentive to move from agricultural to other use, not to move between different forms of agricultural use.
I believe that one must see the scheme for what it is. It is a five-year definitive offer to try to help farmers who seek diversification or to attract businesses to occupy fanning premises for diversification in the context of the crisis and problems which currently affect the rural community. The context in which we are addressing that type of problem may well change within five years. Therefore, although obviously we wish to keep open the option for the scheme and may well trigger the option before the end of the five years, for the moment five years appears to us to be an adequate incentive and signal to farmers and others that the Government would support financially the diversification of such properties.
With regard to non-farming businesses, contrary to what was said, significant help is being provided to those who suffer from the knock-on effects of the foot and mouth outbreak. However, we should separate that help from assistance provided within the Bill. We started this process before the foot and mouth disease broke out. As the noble Baroness, Lady Byford, said, a serious problem already existed in relation to economic activity within the countryside, and that problem is addressed. The foot and mouth disease is a serious aggravation of the problem but it is being dealt with separately. Therefore, we should not mix up the two.
In view of the manner in which the Government are approaching the issue, I do not believe that the noble Earl's amendment would be appropriate. Therefore, I hope that he will not press it and that the Committee will resist it.
Baroness Byford: Before the noble Lord sits down, perhaps I may ask a question in response to what he said. If, for example, either a farmer chooses to take early retirement, which I suspect some farmers may do because of the enormous pressures put on them, or a farm is sold because of a death and a new owner takes over, am Ito understand that the new owner would not be eligible for this scheme?
Lord Whitty: I may have to clarify this matter in writing. However, my understanding of the situation is that if a farm changes hands but the property is still in agricultural use—the farm may not be full of animals because of foot and mouth disease, but it will be in agricultural use and will not be used for anything else—the property will continue to be eligible at the point at which it moves into non-agricultural use. In other words, the scheme applies to the property and not to the owner of the property, and it applies to the nature of the use to which the property is put.
Baroness Miller of Chilthorne Domer: Before the Minister sits down, perhaps I may make a point for the
1130
record. Although I recognise that we do not want to enter into a discussion about foot and mouth disease, he said that significant help was being offered to non-farming businesses which have suffered from the effects of the outbreak. We on these Benches do not believe that the Government are offering significant help to non-farming businesses. We have asked constantly for consequential loss and interest-free loans, but such help has not been forthcoming. Therefore, I dispute the Minister's statement.
Lord Whitty: The Liberal-Democrat Benches may well say that the help provided is not sufficient.; nevertheless, it is significant. I believe that great assistance will be given in many areas through rate relief and through help to the rural councils affected in those areas via temporary reductions in rateable value, and so forth.
It is true that the Government are not providing compensation for income loss. However, we are not providing compensation for income loss to farmers either; we are providing compensation for loss of beasts. To go down the road of compensation for income loss would be a very slippery slope for any government. In effect, they would become the insurer of last resort. My noble friend Lady Hayman and others have made it clear to the House that that is not the way in which we intend to proceed. There are other significant—I insist on that word—forms of relief for businesses that have been affected by the knock-on effects of foot and mouth.
I recognise that there will be a continuing problem in this area but we should perhaps return to it after certain events. I do not doubt that foot and mouth will be debated when we return. It is not appropriate to discuss it in detail in relation to this Bill, which deals with an underlying situation rather than one that arose as a result of the unfortunate events of the past few months.
The Earl of Caithness: I am therefore sure that my noble friend Lady Byford will be making a Statement on foot and mouth as soon as Parliament reassembles!
I thank the Minister for his full and thoughtful reply, although he will not be surprised to hear that I am not very satisfied with it. I am sure that the Chief Whip, who is sitting next to the Minister, is, deep in his heart, supportive of my amendment, which would help farmers. He helped and advised many farmers when diversification was taking place, and I am sure that they would ask him to be a little more understanding of the practical problems that they face. If we had had longer we might have made some progress.
The Minister said that the proposal is a short-term measure. That makes it sound as if farm diversification is new. However, my first job as a land agent in 1972 involved a farm diversification programme. That approach has been around for at least 30 years. To suddenly come up with the five-year limit is helpful but impractical. It would have been much better for farmers if the Government had seen fit to agree to my amendment.

1131
I hope that the Minister will clarify one point. He lost me when responding to a query raised by my noble friend Lady Byford. He was discussing the situation in which a business goes bankrupt within five years and a new one is established. I was not certain whether or not he said that the new business could benefit from rate relief.
Lord Whitty: The new business would benefit in relation to the outstanding part of the five years; the five-year period would not start again.
The Earl of Caithness: I am grateful to the Minister.I was not certain whether the period related to the first business—the change from agriculture—rather than the change from industry to industry.
I was sorry that we got no support at all from the Liberal Benches. I congratulate the noble Lord on getting the noble Baroness, Lady Miller, to her feet, but that related to a different point.
Baroness Miller of Chilthorne Domer: I was simply trying to save the House time. I referred to the matter during my speech on Second Reading and I thought that that would be adequate. I said that if time allowed we should have supported several amendments, including that which is before us. However, we are anxious to get the Bill on to the statute book and will therefore accept it in its current form.
The Earl of Caithness: I am grateful to the noble Baroness. It is wonderful to get some Liberal support.
I am grateful to the Minister for his answer. The Government's approach is a mistake but he says that it involves a short-term measure. I hope that when he considers the longer-term measure, he will take account of the valid arguments that this side of the House has put forward. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clauses 2 to 6 agreed to.
House resumed: Bill reported without amendment; Report received.
Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), Bill read a third time, and passed.
Lord Carter: My Lords, we have received a Commons message on the Health and Social Care Bill. We need to adjourn briefly. As a result of some effective sign langauge from the door of the Chamber, I believe that it is intended to suggest a break of 20 minutes. I therefore beg to move that the House do now adjourn during pleasure until 3.50 p.m.
Moved accordingly and, on Question, Motion agreed to.
[The Sitting was suspended from 3.30 to 3.50 p.m.]

Health and Social Care Bill
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, I beg to move that the Commons reasons and amendments be now considered.
Moved, That the Commons reasons and amendments be now considered. — (Lord Hunt of Kings Heath.)
On Question, Motion agreed to.

COMMONS REASONS FOR DISAGREEING TO CERTAIN LORDS AMENDMENTS AND COMMONS CONSEQUENTIAL AMENDMENTS TO THE BILL
[The page and line refer to HL Bill 27 as first printed for the Lords]
LORDS AMENDMENT NO. 6
6 Before Clause 12, insert the following new Clause—
"Reform of Community Health Councils
(1) The Secretary of State shall by regulations provide for the reform of Community Health Councils established for districts in England under section 20 of the 1977 Act.
(2) The regulations shall provide for—

(a) renaming Community tiealth Councils as Patients' Councils (referred to in this section as "Councils");

(b) the information which local National Health Service bodies must provide to Councils;

(c) the funding of Councils and the provision of premises and other facilities by the Secretary of State;

(d) the membership of Councils.

(3) The functions of a Council are—

(a) to establish sub-committees for each National Health Service trust and Primary Care Trust in the district of the Council, to be known as Patients' Forums (referred to in this section as "Forums");

(b) to facilitate the co-ordination by Forums of their activities:

(c) to make reports and submit recommendations to Health Authorities, local authorities and their committees, National Health Service trusts. Primary Care Trusts, the national patients' body for England and to the Secretary of State in accordance with the regulations;

(d) to carry out such arrangements as may be made with the Council under section 19A of the 1977 Act (independent advocacy services);

(e) to appoint, for each Forum within its district, one member as a non executive director to the board of the trust to which the Forum relates

(f) to appoint a representative, having such functions as may be prescribed. to attend meetings of each relevant Health Authority:

(g) to arrange for functions of Forums to be performed under joint arrangements between Councils, where such arrangements are appropriate to meet the needs of their communities;

(h) to receive and respond to disclosures under the Public Interest Disclosure Act 1998 (c. 23) where such disclosures reveal matters of concern for patients in the health service or for the wider community;

1133

(i)to refer issues of concern to patients to Health Authorities, local authorities and such national quality assurance bodies as the regulations may prescribe and to the Secretary of State;

(j) such other functions as the regulations may prescribe.

(4) The functions of a Forum are to—

(a) monitor and review the operation of services provided by, or under arrangements made by, the trust to which it relates;

(b) obtain the views of patients, carers and the wider community about those services and report on those views to the Council and to the trust;

(c) having regard to the views obtained in accordance with paragraph (b), provide advice and make reports and recommendations about matters relating to those services to the Council. the relevant Health Authority, and the trust;

(d) make available to patients and their carers advice and information about those services;

(e) carry out such functions in relation to primary care services as may be prescribed by regulations made by the Secretary of State;

(f) in prescribed circumstances, to perform any prescribed function of the trust with respect to the provision of a service affording assistance to patients and their families and carers;

(g) carry out such other functions as may he prescribed.

(5) Regulations shall provide for the membership of a Forum, which shall comprise—

(a) as to at least a quarter of its membership, members or representatives of voluntary organisations whose members or client groups have an interest in the health service;

(b) as to at least a quarter of its membership, patients;

(c) as to at least a quarter of its membership, carers;

(d) such other persons as may be prescribed.

(6) References in subsection (4) to "services" are references to—

(a) services provided as part of the health service (within the meaning of the 1977 Act) in England;

(b) services provided in England in pursuance of section 31 arrangements in relation to the exercise of health-related functions of a local authority; and

(c) services provided elsewhere (and not part of the health service in England) in pursuance of section 31 arrangements with a local authority in England.

(7) In this section—

(a) "relevant Health Authority" in subsection (4)(c) in relation to a Forum for a Primary Care Trust, means the Health Authority whose area is, or includes, the area for which the trust is established;

(b) "prescribed" means prescribed by regulations made by the Secretary of State;

(c) "section 31 arrangements" means arrangements under regulations under section 31 of the Health Act 1999 (c. 8) (arrangements between NHS bodies and local authorities);

(d) "carer", in relation to a patient, means a person who provides care for the patient, but who is not employed to do so by any body in the exercise of its functions under any enactment;

(e) "the health service" has the same meaning as in the 1977 Act;

(f) "patient" includes (as well as a patient within the meaning of that Act) a person who receives services provided in pursuance of section 31 arrangements in relation to the exercise of health-related functions of a local authority."

The Commons disagreed to this amendment for the following Reason—
6A Because it is inappropriate for Community Health Councils to he reformed in the way proposed by the Lords.
Lord Hunt of Kings Heath: My Lords, I beg to move that the House do not insist on their Amendment No. 6, to which the Commons have disagreed for their reason numbered 6A. In speaking to this Motion I shall also speak to Amendments Nos. 8A to 8G, 9 to 15, 82 and 83.
As noble Lords will know, in the NHS Plan we set out proposals for a radical change to the system of patient representation, including the establishment in every trust and primary care trust of a patient advocacy and liaison service, with a fundamental building block of a patients' forum for every trust and PCT. The intention was that the scrutiny function of community health councils would be transferred to the overview and scrutiny committees of elected local authorities and that an independent advocacy service would be established where current support for patients in pursuing concerns about patient services is patchy and inconsistent.
The new system would have replaced community health councils because the Government believe that, whatever their strengths and weaknesses, CHCs have not been able to deliver the strength, consistency and power of patient representation we believe to he essential. In discussions which have taken place both in the other place and in this House, the Bill has been amended and in many cases improved upon. However, other amendments made in this House had the effect of undermining that approach; some were technically and legally unworkable and do not deliver the change in the structure based on independent patients' forums.
We believe overall that we have made significant efforts to find an agreed way forward. It is now clear. given the time constraints with a pending general election, that the Bill would be jeopardised unless we removed clauses relating to patient representations. We are committed to greater empowerment of patients, but we are also determined to lift the burden of nursing care costs for elderly people and their families as soon as possible and it is essential that we meet our October timetable.
As a consequence, the Commons returned the Bill with further amendments. The effect of those amendments, in combination with amendments made in this House and accepted by the Commons, is to leave the existing law in relation to community health councils and the Association of Community Health Councils intact. They will also remove from the Bill the provisions relating to patient councils, patient forums and the new patient body. We regret the loss of the new national patients' body. We believe that the wider role and membership for the body and the opportunity to bring on board those voluntary organisations representing patients would have been a considerable step forward. But we cannot have two statutory national bodies to represent patients and the public. So maintaining the Association of CHCs means we must withdraw the proposals for the new body in the Bill. We will need to think again about how we pick up the proposals from the feasibility study on national

1135
patient representation that was carried out by the department and a consortium of leading patients' organisations.
Change is inevitable in relation to patient representation and patient involvement. We will still seek to establish patient forums. They are an essential tool if patients are to challenge and change each part of the NHS. We will need further legislation to give them the statutory independence we would like them to have. But in the interim, non-statutory forums can be established.
To improve patient representation change is inevitable. We shall need to return to these matters after the election. Further legislation may be necessary. As we said from the start of this long debate, if it is to be practicable any change must be as seamless as possible and we must make the best and most appropriate use of the skills and expertise already within the system. I beg to move.
Moved, That the House do not insist on their Amendment No. 6 to which the Commons have disagreed for their reason numbered 6A. — (Lord Hunt of Kings Heath.)
Earl Howe: My Lords, I thank the Minister for introducing this group of amendments. We have reached a position that I, and I expect he, would rather we had not reached on these vexed issues. I am perfectly certain that, but for the Government's obduracy, we could have reached an agreement that would have required them to move only a short distance from the position to which they have adhered so doggedly throughout the passage of the Bill.
In matters such as this I ask myself whether we are being unreasonable. I do not believe that we are. Particularly on Report, it was noticeable that not only were there no supporters of the Government's policy on this side of the House, but also no unequivocal supporters on the Government Benches, apart from the Minister himself. I submit that that is telling and reflects what I have found to be the opinion around the country at large.
Patient groups and informed commentators are, almost to a man and woman, unable to comprehend why the Government have chosen to reorganise patient representation from scratch rather than build upon and improve the current arrangements. The Government have themselves to blame for that situation. Had they engaged in proper consultation from the outset, the conclusion might have been a great deal happier.
In the situation in which we now find ourselves, my chief fear is that the uncertainty generated by the lack of a definitive conclusion in this Parliament will cause the key staff in community health councils around the country to vote with their feet and to decide that enough is enough. I genuinely hope that that will not happen and that, in the short time that they have left, the Government will discourage any such moves.
1136
The substantive debate is over, at least for now. We do not intend to obstruct the Government in removing from the Bill the clauses relating to patient representation. Clearly, to have had our amendments accepted would have been the ideal outcome for us. However, making the substance of those amendments an issue on which we can campaign during the weeks ahead is an outcome with which we can live quite comfortably. Whichever party wins the general election, it will want to introduce reforms to patient representation. I believe that there is a legitimate debate to be held during the election campaign on that issue.
I have one question for the Minister. With the Bill framed as it will be when it leaves this House, we shall have a situation in which overview and scrutiny committees will be brought into being alongside the community health councils, which will continue in being for the present at least. There would appear to be an element of overlap in the functions of each. Can the Minister comment on how that overlap will be reconciled in practical terms?
He also mentioned that patients' forums will be set up on a non-statutory basis. I would be grateful if he could give the House some idea of how they will be required to interact with community health councils. What timescale do the Government envisage for establishing patients' forums?
Once again, I thank the Minister for what he has told the House today and I look forward to a resolution of these issues at some future date, hopefully with a Conservative government on the Benches opposite.
4 p.m.
Lord Clement-Jones: My Lords, like the Minister, I have regrets about the failure to agree a compromise arrangement in respect of Amendment No. 6 and the Government's original proposals. Unfortunately, there was too little time. I echo the words of the noble Earl, Lord Howe, and regret that discussions on these matters between the Government and the CHCs did not begin earlier. It is extremely difficult to negotiate at the kind of speed that was required.
Unfortunately, we have a grave situation in which the CHCs may be in limbo for a potentially long time, with difficulty recruiting staff, with uncertainty about their future and so forth. That is greatly to be regretted as a result of the failure of the parties to resolve the ingredients of the Bill.
On a more upbeat note, we should take the opportunity between the general election and the presentation of a new Bill to rethink the matter and to look again at the way in which patients should be represented. Will the Minister undertake to consult widely, to involve patients, CHCs, local government and others in discussions about those future arrangements, whether they relate to patients' councils, patients' forums, PALS or whatever.
It would also be useful if the Minister could indicate where he sees the balance lying between giving directions and primary legislation. Obviously, there is

1137
a great deal that a government in giving directions can do in terms of setting up patients' forums. An irreducible minimum of primary legislation is still required and I urge the Government not to take a headlong path down the direction route but to come back with a coherent comprehensive plan for patient representation in primary legislation.
It remains for me simply to say that I hope that out of the wreckage of this part of the Bill after the election we can secure a new system of patient representation which is strongly independent and coherent, and has a national body to co-ordinate it, which serves the interests of and empowers patients in the NHS. I look forward to considering the further legislation mentioned by the Minister, but I hope that it will be built on the best of the existing system rather than outright abolition. And we, too, on these Benches look forward to the inevitable public debate on these matters during the election.
Baroness Carnegy of Lour: My Lords, the noble Lord referred only to patient representation, but the community health councils serve the interests of the public at large, representing them as well as patients. It seems to me most extraordinary that the Government have not withdrawn the proposal about the joint overview and scrutiny committee and will expect CHCs and that committee together to represent public opinion. I look forward to hearing the Minister's reply to my noble friend Lord Howe as regards the extent to which the present statutory powers of the two bodies will overlap.
However, apart from that, there will be competition. I cannot see how the proposal can work. Will the Minister explain why the Government have not withdrawn the introduction of the joint overview and scrutiny committee? The question of how one democratises the health service is not an easy one to answer. I am not sure that it is good project but the way in which it is happening is bound to lead to a good deal of conflict. I hope that the Minister will be able to explain why the Government are leaving the situation as it now is.
Lord Rea: My Lords, from the beginning I was against the abolition of CHCs but, like many other noble Lords, I favoured their reform. I believe that our amendment which was accepted carried the seeds of that reform rather effectively, building as it did on many of the structures mentioned in the NHS Plan. The noble Earl, Lord Howe, is a little hard on the Government in saying that it is entirely their fault that the amendment was rejected. I understand that the Government would have been willing to accept a number of measures incorporated in our amendment but there was too little time and the operation of a number of forces, the details of which I shall not go into, made that impossible. I hope that the measures incorporated in that amendment will be considered in future discussions which I am sure will start soon after the election.
Lord Hunt of Kings Heath: My Lords, I believe that we first started to consider the question of community
1138
health councils in the debate on the Queen's speech some little time ago. It has been an enriching debate. I reject the charge made by the noble Earl, Lord Howe, because right from the start the Government have been concerned to put in place a much more robust system for patient and public involvement in the health service. At all times we have sought to ensure that the public have speedy access to internal trust mechanisms and advocacy and a powerful patient forum within each NHS organisation so that the views of patients and the public really can come to the fore.
We have worked very hard, particularly in recent days, to find a satisfactory way through. Like other noble Lords, I regret that it has not been possible to do that. It would be a pity if, as a result. there was uncertainty among staff who currently work within community health councils. Whatever we eventually arrive at by way of future arrangements, we shall always need good people with the experience to relate to, and act on behalf of, patients. I have no doubt that with the independent advocacy services and the establishment of patient forums, albeit by directions rather than primary legislation, in future there will be endless opportunities for staff and the people who at the moment work so hard on CHCs to play a full part in the NHS.
A number of questions have been asked about the relationship between local government oversight and scrutiny committees and community health councils. The noble Baroness, Lady Carnegy, asked why the OSCs were being retained in the Bill. There are two reasons, the first of which is purely technical. The clauses have been passed by both Houses. It would have been highly inappropriate, perhaps even impossible, to remove them. Secondly, and more substantially, we believe that local government must have a much stronger role in the affairs of the NHS in future and that the democratic deficit which has existed in the health service over its 52 years will be reduced by local authority involvement.
I accept that, given the current powers of CHCs and the guidance that we have given to the health service about what those bodies may do, there are issues to do with reconciling that responsibility with those of the OSCs. We shall turn to that as soon as we can, and certainly immediately after the election with a new Labour government, to ensure that there is no overlap or duplication. Obviously, we believe that patient forums are very important and we seek to ensure that they are in place in the National Health Service as soon as possible.
I take the point raised by the noble Lord, Lord Clement-Jones, about the use of directions. However, I believe that there has been almost unanimous agreement that patient forums will be an important element in future. We want to get on with that as soon as we can. As to future discussions, we shall talk to organisations and the people involved about how to take forward patient empowerment and public involvement. I therefore ask the House not to insist on its amendment to which the Commons have disagreed.
On Question, Motion agreed to.

LORDS AMENDMENT NO. 8
8 Clause 13, leave out Clause 13
The Commons agreed to this amendment, and made the following consequential amendments to the Bill—

8A

Page 11, leave out Clause 14

8B

Page 11, leave out Clause 15

8C

Page 12, leave out Clause 16

8D

Page 14, line 12, leave out subsections (6) and (7)

8E

Page 87, leave out lines 14 to 16

8F

Page 88, leave out line 35

8G

Page 88, leave out lines 44 and 45 and insert "of a description presecribed by regulations made by the Secretary of State, and"

Lord Hunt of Kings Heath: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 8A to 8G. These amendments are consequential to their agreement to Amendment No. 8.
Moved, That the House do agree with the Commons in their Amendments Nos. 8A to 8G.—(Lord Hunt of Kings Heath.)
On Question, Motion agreed to.

LORDS AMENDMENT NO. 9
9 Clause 14, page 11, line 34, at end insert ", or
(e) persons providing services under arrangements made under Schedule 8A to the 1977 Act or section 35,"
The Commons disagreed to this amendment for the following reason—
9A Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

LORDS AMENDMENT NO. 10
10

Clause 16, page 12. line 30, after "established" insert "or by a Health Authority"

The Commons disagreed to this amendment for the following reason—

10A

Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

LORDS AMENDMENT NO. 11
11

Page 13, line 10, leave out from "members" to end of line 12 and insert "under paragraph 4(c) above of a Primary Care Trust for which there is a Patients' Forum shall be a person appointed by the Forum."

The Commons disagreed to this Amendment for the following reason—

11A

Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

LORDS AMENDMENT NO. 12
12

Page 13, line 15. leave out from "trust" to "and" in line 16 and insert "for which there is a Patients' Forum shall be a person appointed by the Forum.","

The Commons disagreed to this amendment for the following reason—

12A

Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

LORDS AMENDMENT NO. 13
13

Page 13, line 17, leave out "before "any"" and insert "at the beginning"

The Commons disagreed to this amendment for the following reason—

13A

Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

LORDS AMENDMENT NO. 14
14

Clause 17, page 13, line 25, at end insert "through each Patients' Council"

The Commons disagreed to this amendment for the following reason—

14A

Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

LORDS AMENDMENT NO. 15
15

After Clause 17, insert the following new Clause—

"National patients' bode for England
(1) The Secretary of State shall by regulations establish a body corporate ("the national body") to exercise in relation to the health service in England the following functions—

(a) advising the Secretary of State. and such bodies as may be prescribed, with respect to arrangements for public involvement in, and consultation on, matters relating to the health service;

(b) representing to the Secretary of State and such bodies as may be prescribed, and advising him and them on. the views, as respects the health service, of Patients' Forums, Patients' Councils and those voluntary organisations and other bodies appearing to the national body to represent the interests of patients and their carers;

(c) assisting Patients' Forums and Patients' Councils in, and advising them with respect to, the performance of their functions;

(d) such other functions as may be prescribed.

(2) In carrying out its functions the national body shall have regard to any guidance given to it by the Secretary of State.
(3) The Secretary of State may by regulations make further provision in relation to the national body.
(4) The regulations may in particular make provision as to—

(a) the appointment of members:

(b) any qualification or disqualification for membership;

(c) terms of appointment;

(d) circumstances in which a person is to cease to be a member or may be suspended;

(e) the proceedings of the national body;

(f) the discharge of any function of the national body by a committee;

(g) the appointment, as members of a committee, of persons who are not members of the national body

(h) the provision of information to the national body by a health service body. a Patients' Forum or a Patients' Council, including descriptions of information which are or are not to be provided;

(i) the funding of the national body;

1141

(j) the payment, to or in respect of members of the national body, of such remuneration, pensions, gratuities and allowances as may be determined in accordance with the regulations;

(k) the preparation and auditing of accounts of the national body.

(5) The regulations may include provision applying, or corresponding to, any provision of Part 5A of the Local Government Act 1972 (c. 70) (access to meetings and documents), with or without modifications.
(6) The regulations may authorise the national body to make charges for the provision of advice or other services.
(7) The national body shall—

(a) prepare a report in relation to its activities in each financial year,

(b) as soon as possible after the end of each financial year, send a copy of its report for that year to the Secretary of State,

(c) publish any such report in accordance with prescribed provisions,

(d) make such other reports to the Secretary of State, and supply to him such information, as he may require.

(8) Before making any regulations under this section the Secretary of State shall consult—

(a) such persons as appear to him to be appropriate to represent the interests of patients and their carers, and

(b) such other persons (if any) as appear to him to be appropriate.

(9) In this section—
"carer" has the same meaning as in section (Reform of Community Health Councils);
"the health service" has the same meaning as in section 7:
health service body" means—

(a) a Health Authority,

(b) a Special Health Authority,

(c) an NHS trust, or

(d) a Primary Care Trust;

"patient" has the same meaning as in section (Reform of Community Health Councils);
prescribed means prescribed by regulations made by the Secretary of State."
The Commons disagreed to this amendment for the following reason—

15A

Because it would involve a charge on public funds, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Lord Hunt of Kings Heath: My Lords, I beg to move that the House do not insist on their Amendments Nos. 9 to 15 to which the Commons have disagreed for their reasons numbered 9A to 15A.
Moved, That the House do not insist on their Amendments Nos. 9 to 15 to which the Commons have disagreed far their reasons numbered 9A to 15A.—(Lord Hunt of Kings Heath.)
On Question, Motion agreed to.

LORDS AMENDMENT NO. 60
60

Clause 67, page 67, line 11, leave out subsections (1) and (2)

The Commons agreed to this amendment, and made the following consequential amendments to the Bill—

60A

Page 63, line 13, leave out "such offences as are mentioned in subsection (2)(c)" and insert "offences punishable on summary conviction by a fine not exceeding level 5 on the standard scale or such other level as is prescribed"

60B

Page 74, line 7, leave out "67"

Lord Hunt of Kings Heath: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 60A and 60B. These amendments are consequential on their agreement to Amendment No. 60. The amendments do not in any way alter the meaning or the remainder of the clause. In another place, my right honourable friend moved that Amendments Nos. 62, 73 and 74 made in this House be rejected because they referred to subsections (1) and (2) of Clause 67 which was removed from the Bill in this House last week and agreed in the Commons earlier today. It would therefore not make sense for them to be part of the Bill. I beg to move.
Moved, That the House do agree with the Comrnons in their consequential Amendments Nos. 60A and 60B.
On Question, Motion agreed to.

LORDS AMENDMENT NO. 62
62

Clause 67, page 68, line 50, at end insert—

"(10A) For the purposes of this section, patient information is "NFIS patient information" if that information (or any of the information from which it is derived) was obtained or generated in the course of the provision of the health service."

The Commons disagreed to this amendment for the following reason—

62A

Because it relates to provisions left out of the Bill by the Lords.

Lord Hunt of Kings Heath: My Lords, I beg to move that the House do not insist on their Amendment No. 62 to which the Commons have disagreed for their reason numbered 62A.
Moved, That the House do not insist on their Amendment No. 62 to which the Commons have disagreed for their reason numbered 62A.—(Lord Hunt of Kings Heath.)
On Question, Motion agreed to.

LORDS AMENDMENT NO. 73
73

Clause 75, page 73, line 40, at end insert "(excluding section 67(1) and (2))"

The Commons disagreed to this amendment for the following reason—

73A

Because it relates to provisions left out of the Bill by the Lords.

LORDS AMENDMENT NO. 74
74

Page 74, line 7, after "67" insert "(1) and (2)"

The Commons disagreed to this amendment for the following reason—

74A

Because it relates to provisions left out of the Bill by the Lords.

Lord Hunt of Kings Heath: My Lords, I beg to move that the House do not insist on their Amendment Nos. 73 and 74 to which the Commons have disagreed for their reasons numbered 73A and 74A. I beg to move.
Moved, That the House do not insist on their Amendments Nos. 73 and 74 to which the Commons have disagreed for their reasons numbered 73A and74A.—(Lord Hunt of Kings Heath.)
Baroness Northover: My Lords, we welcome the acceptance in the other place of the removal of subsections (1) and (2) of Clause 67 on anonymised patient data. There was always a danger that useful information for researchers would be lost if those measures were passed.
We also welcome the acceptance in the other place of the provisions on confidential data; in particular, the establishment of a statutory advisory committee, which we on these Benches originally proposed. Action needed to be taken now to strike the right balance between the rights of the patient to confidentiality and the public interest in medical research. Already there has been much damage to research and treatment because patient information has stopped going through to the disease registry.
I am grateful to the Minister for the time and care that he took to ensure that in that crucial area we could reach an agreement. We are therefore happy to accept these amendments.
On Question, Motion agreed to.

LORDS AMENDMENT NO. 82
82

Schedule 5. page 90, line 23, leave out "In"

The Commons disagreed to this amendment for the following reason—

82A

Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

LORDS AMENDMENT NO. 83
83

Page 90, line 24, after "Act)'" insert "shall be amended as follows.

'(2) After paragraph 40 insert—

"40A Patients' Forum established under section (Patients' Forums) of the Health and Social Care Act 2001.

(3)"

The Commons disagreed to this Amendment for the following reason—

83A

Because it is inappropriate in consequence of the Commons disagreeing to Lords Amendment No. 6 and agreeing to Lords Amendments Nos. 7 and 8.

Lord Hunt of Kings Heath: My Lords, I beg to move that the House do not insist on their Amendments Nos. 82 and 83 to which the Commons have disagreed for their reasons numbered 82A and 83A.
Moved, That the House do not insist on their Amendments Nos. 82 and 83 to which the Commons have disagreed for their reasons numbered 82A and83A.—(Lord Hunt of Kings Heath.)
On Question, Motion agreed to.

Criminal Justice and Police Bill
Returned from the Commons with the amendments agreed to.
House adjourned at a quarter past four o'clock.